Question

Erik puts $6,000.00 into an account to use for school expenses. The account earns 5%interest, compounded monthly. How much will be in the account after 8 years?

Answer 1

Answer:

$A=\text{ \ 8,944 after 8 years.}$

Step-by-step explanation:

Compounded interest is represented by the following equation:

$\begin{gathered} A=P(1+\frac{r}{n})^{nt} \\ \text{where,} \\ P=\text{ principal invested} \\ r=\text{ interest rate} \\ n=\text{ number of times compounded per unit t} \\ t=\text{ time in years} \end{gathered}$

Then, for a principal of $6,000.00 at a 5% interest, compounded monthly. After 8 years Erik would have:

$\begin{gathered} A=6000(1+\frac{0.05}{12})^{96} \\ A=\text{ \ 8,943.51} \\ \text{ Rounding to the nearest cent:} \\ A=\text{ \ 8,944 after 8 years.} \end{gathered}$