The prinipal represents an amount of money deposited in a sa

The prinipal represents an amount of money deposited in a savings account subject to compoud interest at the given rate

Prinipal: $2500 Rate: 5% Compounded: Monthly Time: 4 years

A. find how much money will be in the account after the given number of years

B. Find the interest earned

A. the amount of money in the account after 4 years is $ ( Round to the nearest hundredth as needed)

B.) The amount of interest earned is $__ (Round to the nearest hundredth as needed)

Solution

ANSWER

Formula for amount, A, after n periods at interest rate r% per period, compounded every period, from principal P is given by

A = P{1 + (r/100)}ⁿ

In the given problem, P = 2000, n = 4 years = 48 months, r = 5% per annum or( 5/12)% per month. [Since compounding is given to be monthly, period and interest rate are to be converted into monthly equivalents.]

Substituting these values in the formula, A = 2000{1 + (5/1200)⁴⁸ = 2000(17/1200)⁴⁸

= 2000 x 1.207949 = 2415.898 = $2415.90 ANSWER for A part

Interest earned = A – P = 2415.90 – 2000 = $415.90 ANSWER for B part