Question

Question #55b15

Answer 1

`A=$22196.40`

Explanation:

The formula for calculating compound interest is:

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

where

A = future value of investment, including interest

P = principal investment or initial deposit

r = annual interest rate in decimal

n = the number of times that interest is compounded in 1 year

t = the number of years the money is invested

For this question:

`P=10000`

`r=0.08` which is `8%` in decimal

`n=12` since the interest if compounded monthly

`t=10`

Plugging everything into the equation:

`A=10000(1+0.08/12)^((12)(10))`

`A=10000(1+0.08/12)^120`

Make sure to calculate what is in the brackets and raise it to the power of `120` before multiplying by `10000`:

`A=$22196.40`