Question

When investing money in a bank account, in which situation will you have the most money in your account at the end of three years?

Compounded semiannually
Compounded yearly
Compounded quarterly
Compounded monthly

Answer 1

Answer:

continuously is the most, and what is actually done at the banks...

as for your answer:

Compounded monthly

Step-by-step explanation:

Answer 2

When investing money in a bank account, you will have the most money in your account at the end of three years when compounded monthly.

What is compound interest?

Compound interest is the interest you earn on interest.

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

Where,

A = final amount

P = initial principal balance

r = interest rate

n = number of times interest applied per time period

t = number of time periods elapsed

To check in which situation we will earn the most money in end of  three years, we calculate the final amount in each situation keeping other variables constant.

Let

P = 5000

r = 5%

t = 3 years

When compounded annually,

$A = 5000(1 + 0.05)^{3} = 5788.125$

When compounded semiannually,

$A = 5000(1 + 0.025)^{6} = 5798.467$

When compounded quarterly,

$A = 5000(1 + 0.0125)^{12} = 5803.772$

When compounded monthly,

$A = 5000(1 + 0.0125)^{12} = 5807.361$

Thus, it can be said that you have the most money in your account at the end of three years when compounded monthly.

Learn more about compound interest here

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