Problema Solution
An initial deposit of $900 earns 11% interest, compounded monthly. How much will be in the account in
5 1/2 years?
Answer provided by our tutors
The formula for the compound amount after t years is
A = P(1 + i)^n
where
A is the future (maturity) value;
P = $900 is the principal;
r = 0.11 or 11%is the annual interest rate;
m = 12 is the number of compounding periods per year (compounded monthly)
t = 5 1/2 years = 5.5 years is the number of years;
n = m*t = 12*5.5 = 66 is the number of compounding periods;
i = r/m = 0.11/12 = is the interest rate per period;
A = 900(1 + 0.11/12)^66
A = $1643.59
after 5 1/2 years there will be $1643.59 in the account.