An initial deposit of $20,000 earns 3% interest, compounded monthly. How much will be in the account after 15 years? Round your answer to the nearest cent.
A) $4,090,067.19
B) $31,348.63
C) $31,159.35
D) $20,763.27

Question

Quizplus · Accepted Answer

The correct calculation for compound interest is given by the formula A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest, P is the principal amount ($20,000), r is the annual interest rate (3%, or 0.03), n is the number of times that interest is compounded per year (monthly compounding means n=12), and t is the time the money is invested for in years (15 years). Plugging these values into the formula gives A = $20,000(1 + 0.03/12)^(12*15), which calculates to approximately $31,348.63.

An Initial Deposit of $20,000 Earns 3% Interest, Compounded Monthly