You deposit $2000 in an account. At the end of 21 years, your balance is $10671.45. The bank tells you that the annual interest rate for the account is 8%. How is the interest compounded?
A)quarterly
B)yearly
C)monthly
D)daily
E)continuously

Question

Quizplus · Accepted Answer

The formula for compound interest is A=P(1+r/n)^(nt), where A is the final amount, P is the principal, r is the annual interest rate, n is the number of times interest is compounded per year, and t is the number of years. To solve for n, we can rearrange the formula as n=(ln(A/P))/(t*ln(1+r/n)). Plugging in the given values, we get n=12, which means the interest is compounded monthly. Therefore, the best choice is C.

You Deposit $2000 in an Account