Question

Isabel deposits $6,000 into an account that earns 1.5% interest compounded monthly. Assuming no more deposits and no withdrawals are made, how much money is in the account after 4 years? Compound interest formula:mc002-1.jpg t = years since initial deposit n = number of times compounded per year r = annual interest rate (as a decimal) P = initial (principal) investment V(t) = value of investment after t years

Answer 1

Answer:

The answer is $6,370.78

Step-by-step explanation:

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Answer 2

Interest on interest, or compound interest, is the adding of interest to the principle sum of a loan or deposit. The amount that will be in Isabel's account after 4 years is $6,275.99.

What is compound interest?

Interest on interest, or compound interest, is the adding of interest to the principle sum of a loan or deposit. It's the outcome of reinvesting interest rather than paying it out, so that interest is received on the principal plus previously collected interest in the next quarter.,

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

where A is the final amount

P is the principal amount

r is the rate of interest

n is the number of times interest is charged in a year

t is the number of years

Given the principal amount Isabel puts in the account is $6,000, while rate of interest is 1.5% compounded monthly. Therefore, the amount after 4 years will be,

Amount = $6,000×[1+(0.015/12)]⁽⁴ˣ¹²⁾

              = $6,000 × (1.00125)³⁶

              = $6,000 × 1.0459984

              = $6,275.99

Hence, the amount that will be in Isabel's account after 4 years is $6,275.99.

Learn more about Compound Interest:

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