Question

Fathiyya deposits RM6,000 into a money market account which pays interest at a rate of 10% per year. What will the amount in the account be after 10 years?

Answer 1

QUESTION

Fathiyya deposits RM6, 000 into a money market account which pays interest at a rate of 10% per year. What will the amount in the account be after 10 years?

ANSWER

The correct answer can be found out by using the so called formula for Annual Compound Interest (ACI), which is represented in the picture below

Picture 1. Formula for Annual Compound Interest (ACI)

Where:

A = the future value of the investment, including interest

P = the principal investment amount (the initial deposit amount)

r = the annual interest rate (decimal)

n = the number of times that interest is compounded per year

t = the number of years the money is invested for

According to the formula ACI for our case P=6,000, r=10/100=0.1, n=12 (months in a year), t=10, so we should calculate A- the future value of investment in the following way

$$A = 6000 \cdot \left(1 + \frac{0.1}{12}\right)^{12 \cdot 10}$$

After doing some calculations we will get the answer A=16,242.25. So, after 10 years the amount in the account will be equal to RM16, 242.25.

Answer provided by https://www.AssignmentExpert.com