Question

Compound interest?

The Bakers invest $8500 in an investment account paying 8%, compounded monthly. how much is in the account after 5 years?

Answer 1

$8787.14

Explanation:

8% over 12 months is `8/12=2/3%` per month

Compound interest is added on and then you get interest paid on the interest. There is a formula to use on a calculator to work it out

`8500 xx (1.00dot6)^5=8787.13638` =$8787.14

The $8500 is the capital
The power 5 is for the number of years
The `1.00dot6` is 100% plus the `2/3`% then divided by 100