You deposit 2000 in an account earning 3% interest compounded monthly.
1 answer:
Answer:
a. 3641.51
b. 1641.51
Step-by-step explanation:
The future value formula will tell you the amount in the account in 20 years.
<h3>Formula</h3>FV = P(1 +r/n)^(nt)
Principal P is compounded n times per year at annual rate r for t years.
<h3>Application</h3>The future value of the account with P=2000, r=0.03, n=12, and t=20 will be ...
FV = 2000(1 +0.03/12)^(12·20) = 2000(1.0025^240) ≈ 3641.50999
<h3>a.</h3>The account value in 20 years will be 3641.51.
<h3>b.</h3>The first 2000 of account value is the principal, so the interest is ...
interest = 3641.51 -2000
interest = 1641.51
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<em>Additional comment</em>
Many calculators and all spreadsheets have built-in capability for making this calculation.
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