Question

Use the given information to find the amount A in the account earning compound interest after 6 years when the principal is $3500. r=1.26%, compounded monthly

Answer 1

The amount in account after 6 years is $ 3774.70904

Solution:

The formula for amount when interest is compounded is:

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

Where,

A = the future value of the investment/loan, including interest

P = the principal investment amount (the initial deposit or loan amount)

r = the annual interest rate (decimal)

n = the number of times that interest is compounded per unit t

t = the time the money is invested or borrowed for

From given,

p = 3500

t = 6 years

$r = 1.26 \% = \frac{1.26}{100} = 0.0126$

n = 12 ( since compounded monthly )

Substituting the values we get,

$A = 3500(1+\frac{0.0126}{12})^{12 \times 6}\\\\A = 3500(1+0.00105)^{72}\\\\A = 3500 \times 1.00105^{72}\\\\A = 3500 \times 1.078488\\\\A = 3774.70904$

Thus the amount in account after 6 years is $ 3774.70904