Question

1. You decide to deposit $20,000 into an account that pays 6.5% interest compouded monthly. How much money will you have in the account after 40 years? 2. You put $20,000 into an account that pays 7.25% compounded continuously. How much money will you have in there after 10 years?

Answer 1

use the formula for interest compounded in n periods per year

$A=P\cdot(1+\frac{r}{n})^{nt}$

where n should 12 since it is compounded monthly

$\begin{gathered} A=20,000\cdot(1+\frac{0.065}{12})^{12\cdot40} \\ A=267,392.05 \end{gathered}$