Compute the following to figure out the option that achieves

Compute the following to figure out the option that achieves more at the end of a 10 year period. $12,000 Principal, compounded monthly at 4% interest.

Solution

The formula for compound interest is F = P(1+r/n)^nt , where P is the Principal, F is the future value, r is the rate of interest in decimals, n is the number of periods per year and t is the number of years. Here, P = $12000, r = 4/100= , n = 12 and t = 10. Therefore, F = 12000( 1+ 0.04/12)^12*10 = 12000( 1204/1200)¹²⁰ = 12000* 1.490832682 = $17889.99218 = $17889.99 ( on rounding off to the nearest cent).