Question

Kinsley opened a savings account and deposited 500.00 as principal the account earns 4%interest compounded monthly what is the balance after 8 years

Answer 1

To solve this problem, we will use the following formula

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

where r is the interest rate, P is the principal, n is the number of times interest is compounded per unit of t and t is the time. In here where are compounding monthly a rate of 4%. So, r=4% and n=12 since we want to understand how the rate behaves yearly. Since we want to find the final amount after 8 years, we take t=8. So we have

$A=500(1+\frac{0.04}{12})^{12\cdot8}=688.197$

So Kinsley would have 688.20 after 8 years