How much would 200 invested at 5 interest compounded monthly

How much would $200 invested at 5% interest compounded monthly be worth after 9 years? Round your answer to the nearest cent. A $207.63 B $363.82 C. $310.27 D $313.37

Solution

Answer :

Annual compound interest formula

The formula for annual compound interest is A = P (1 + r/n)^nt:

Where:

A = the future value of the investment/loan, including interest
P = the principal investment amount (the initial deposit or loan 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 or borrowed for

From the given problem , we have

P = $ 200

r = 5 %

n = 1 ( monthly)

t = 9

Then A = 200( 1 + 0.05 / 1 )⁽⁹⁾

             = 200( 1 + 0.05 )⁹

               = 310.265 = $ 310.27 ( approx )