Use the compound interest formula for compounding more than once a year to determine the accumulated balance afterthe stated period.
-$5000 deposit at an APR of 5% with monthly compounding for 6 years

Question

Quizplus · Accepted Answer

The compound interest formula for compounding more than once a year is A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest, P is the principal amount (the initial amount of money), r is the annual interest rate (decimal), n is the number of times that interest is compounded per year, and t is the time the money is invested for in years. For this problem, P = $5000, r = 5% or 0.05, n = 12 (since the interest is compounded monthly), and t = 6 years. Plugging these values into the formula gives A = 5000(1 + 0.05/12)^(12*6) = $6745.09.

Use the Compound Interest Formula for Compounding More Than Once