Problema Solution
In this exercise, assume that there are no deposits or withdrawals.
An initial deposit of $900 earns 13% interest, compounded monthly. How much will be in the account in 6 1/2 years? (Round your answer to the nearest cent.)
Answer provided by our tutors
we will use the formula for compound amount
A = P(1 + i)^n
A = the value we are looking for
P = $900
r = 0.13 (13%) annual interest rate
m = 12 compounding periods per year (since it is compounded monthly)
t = 6 1/2 years = 6.5 years
n = m*t = 12*6.5 = 78 compounding periods
i = r/m = 0.13/78 is the interest rate per month
A = 900(1 + 0.13/78)^78
A = $1024.83
after 6 1/2 years there will be $1024.83 in the account.