Question

Charles Adams deposited $1,000 in a savings account that earns 4% interest compounded monthly. He made no other deposits or withdrawals. What was the amount in the account at the end of 2 months? How much is the compound interest?

Answer 1

Answer:

• Amount after 2 months = $1,006,68
• Compound interest = $6.68

Explanation:

Amount is compounded monthly so interest will have to be converted to a monthly figure.

Interest = 4%/12 = 4/12%

Amount at the end of month 2;

= 1,000 * ( 1 + 4/12%)²

= $1,006.6771

= $1,006,68

Compound interest = 1,006.68 - 1,000 = $6.68