If you deposit $1,000 in an account that earns 5% per year, compounded annually, you will have $1,276 at the end of 5 years. What would be the balance in the account at the end of 5 years if interest compounds monthly?

Question

Quizplus · Accepted Answer

When interest is compounded monthly, the formula used is A = P(1 + r/n)^(nt), where P is the principal amount ($1,000), r is the annual interest rate (0.05), n is the number of times interest is compounded per year (12), and t is the number of years (5). Plugging in these values, the balance is approximately $1,283.

If You Deposit $1,000 in an Account That Earns 5