Question

Suppose that 19years ago, a benefactor set up an account for your education. This benefactor made a single deposit of $20,000 that has been earning 6% interest compounded monthly. Since the deposit 19 years ago, no money has been added to or taken from the account. Using a exponential function, what is the amount in the account?

Answer 1

To find the amount in the account you need to find the monthly interest and times it by the number of months since the benefactor opened the account.

Monthly interest:

to find 6% you must use the proportions:

$20,000/100% = X/6%  

then cross multiply,

X= (20,000 x 6)/100 = 1200

this number is your monthly interest.

Months
Now we have to find the months in 19 years:

12 x 19 = 228

times 12 because we know that a year has 12 months and we have 19 years so we must multiply those two.

Total amount:

$1200 (monthly interest rate) x 228 (months) = $273, 600