Question

Calculate the future value of $500.20, earning interest at a rate of 3 7/8% that is compounded monthly for 4 years.

Answer 1

Answer:

$583.92

Step-by-step explanation:

For future value use the formula

$A=P\cdot \left(1+\dfrac{r}{n}\right)^{nt},$

where A is future value, P is initial value, n is number of times interest is compounded per year, r is interest rate (as decimal) and t is time (in years).

In your case,

P=$500.20,

r=0.03875 (because 3 7/8%=3.875%),

t=4,

n=12.

Therefore,

$A=500.20\cdot \left(1+\dfrac{0.03875}{12}\right)^{12\cdot 4}=500.20(1.00323)^{48}\approx \ 583.92.$

Answer 2

Answer:

584.03

Step-by-step explanation:

Given that principal amount = 500.20 dollars

Interest rate = 3 7/8% p.a.= 3100/8(12) per month

Period = 4 years = 4(12) = 48 months.

A= P(1+r/n)^nt

Here n = 12 t = 4 years.

Substitute to get

Future value = $500.20(1+\frac{32}{8(1200)} )^{48}$

=584.03