The stated interest rate on your account is 5%,interest compounded monthly.If you deposit $50 each month,how much will you have in your account in 5 years? (Use time value tables or financial calculator)

Question

Quizplus · Accepted Answer

Using the formula for compound interest, we can calculate the future value of the account:
FV = P * ((1 + r/n)^(n*t)) + PMT * ((1 + r/n)^(n*t) - 1) * (n/r)
Where:
P = initial deposit (0 in this case)
r = annual interest rate (5%)
n = number of times interest is compounded per year (12)
t = time in years (5)
PMT = monthly deposit ($50)

Plugging in these values, we get:
FV = 0 * ((1 + 0.05/12)^(12*5)) + 50 * ((1 + 0.05/12)^(12*5) - 1) * (12/0.05)
FV = $3,401.43

So after 5 years of making monthly deposits of $50 at an interest rate of 5% compounded monthly, the account balance will be $3,401.43. Therefore, the best choice is D.

The Stated Interest Rate on Your Account Is 5%,interest Compounded