Assume that an individual puts $10,000 into a savings account that pays 3% interest, with interest being compounded monthly. The individual plans to withdraw the balance in 5 years to buy a car. If he does not make any further deposits over this period, how much will the individual be able to put towards his purchase?
A) $10,125.63
B) $11,592.74
C) $11,616.17
D) $58,916.03

Question

Quizplus · Accepted Answer

We can use the formula for compound interest:

A = P(1 + r/n)^(nt)

where A is the final amount, P is the initial principal, r is the annual interest rate, n is the number of times interest is compounded per year, and t is the time in years.

Using this formula, we can calculate the final amount after 5 years:

A = 10,000(1 + 0.03/12)^(12*5) = 11,616.17

Therefore, the individual will be able to put $11,616.17 towards the purchase of the car.

Assume That an Individual Puts $10,000 into a Savings Account