Question

If sally invests $400 into the Bank of Reyonds that offers her a 6% interest, compounded monthly, how much money will she have in the bank in 5 years?

Answer 1

Given:

Principal = $400

Rate of interest = 6% compounded monthly

Time = 5 years.

To find:

The amount in the bank after 5 years.

Solution:

The formula for amount is:

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

Where, P is principal, r is the rate of interest, n is the number of time interest compounded in an year and t is the number of year.

Interest compounded monthly. So, $n=12$.

Putting $P=400, r=0.06, n=12$ and $t=5$, we get

$A=400\left(1+\dfrac{0.06}{12}\right)^{12(5)}$

$A=400\left(1+0.005 \right)^{60}$

$A=400\left(1.005 \right)^{60}$

$A\approx 539.54$

Therefore, the amount of money in the bank after 5 years is $539.54.