Question

Which of the following is the balance for a single $2700 deposit in an account with an APR of 4.5% that compounds interest monthly and is invested for 7 years?

Answer 1

The future amount is $3697.52, if a a single $2700 deposit in an account with an APR of 4.5% that compounds interest monthly and is invested for 7 years.

Step-by-step explanation:

The given is,

                     A single deposit amount - $ 2700

                                                       APR - 4.5%

                                            ( Compounded monthly )

                                                    Period - 7 years

Step:1

                 Formula to find future amount with an APR compounded monthly,

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

                Where, A - Future amount

                             P - Initial deposit

                              r - Interest rate

                             n - Number of compounding in a year

                             t - No.of years

                From given,

                         P = $ 2700

                          r = 4.5%

                          n = 12                   (∵ For monthly n becomes 12 )

                           t = 7 years

                   Equation (1) becomes,

                                                           $= 2700(1+\frac{0.045}{12})^{(12)(7)}$

                                                           $= 2700(1+0.00375)^{84}$

                                                           $= 2700(1.36945)$

                                                           $= 3697.52$

                                                       A = $3697.52

Result:

              The future amount is $3697.52, if a a single $2700 deposit in an account with an APR of 4.5% that compounds interest monthly and is invested for 7 years.