Question

Use the compound interest formula to determine the final value of the following amount. $1900 at 10.4% compounded monthly for 4.5 years . What is the final value of the amount?

Answer 1

Answer:

$3027.80

Explanation:

The compound interest formula is the following.

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

where

A = final amount

P = principle amount

r = interest rate / 100

n = number of compounds per interval

t = time interval

Now in our case,

A = unknown

P = $1900

r = 10.4/100

n = 12 months / year ( because the interest is compounded monthly)

t = 4.5 yrs

Therefore, the compound interest formula gives

$A=1900(1+\frac{10.4/100}{12})^{12*4.5}$

Using a calculator, we evaluate the above to get

$\boxed{A=\ 3027.80}$

which is our answer!