Question

5) An investment account pays 42% annual interest compounded monthly F $2500 is invested
in this account, what will be the balance after 15 years?

Answer 1

Answer:

Account balance after 15 years is $ 1,222,370.81

Step-by-step explanation:

Given data:

Principal amount, P = $ 2500

rate of interest, r = 42% = 42/100 = 0.42

Here interest is compounded monthly, hence

no. of times interest is compounded per year, n = 12

time in years, t = 15 years

We know that the formula to calculate the final amount, A when the interest is compounded is:

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

Substituting the known values in the above formula, we get

A = 2500 * $(1 + \frac{0.42}{12} )^{12*15}$

   = 2500 * $1.035^{180}$

   = 2500 * 488.95

   = $ 1,222,370.81