Answer to Question #168979 in Financial Math for Alex

Question

Joe invests $2500 in an account that pays 4.75% per year. How much will he have if it is compounded monthly for 10 years?

Answer 1

A₀ = 2500 $, percentage per year is 4.75, but if it is compounded monthly, then the time 10 years is the same as 120 months. So the total amount of money will be A₁₂₀ = A₀ × (1 + 0.0475/12)¹²⁰ = 2500 × (1 + 0.0475/12)¹²⁰ = 4016.27$