SOLUTION: Hi, my name is Christy. Our professor passes out sheets in our class and I was wondering if you could help me with one of the questions. It is the formula {A = P ( 1+R/N) nt Com

Question 215113: Hi, my name is Christy. Our professor passes out sheets in our class and I was wondering if you could help me with one of the questions.
It is the formula {A = P ( 1+R/N) nt Compounding Interest.
My question is An investment earns 5.6% interest, compounded monthly. Find the balance in the account after 3 years if $6000 is invested initially.
I had A = $6000 ( 1 + 0.056/365) (1) (3) Is this right? I am lost on how to get the correct answer. I know the formula, but cannot figure out how to get the correct answer. Thanks.
Found 2 solutions by Alan3354, jim_thompson5910:
Answer by Alan3354(69443) (Show Source): You can put this solution on YOUR website!
An investment earns 5.6% interest, compounded monthly. Find the balance in the account after 3 years if $6000 is invested initially.
I had A = $6000 ( 1 + 0.056/365) (1) (3) Is this right? I am lost on how to get the correct answer. I know the formula, but cannot figure out how to get the correct answer. Thanks.
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Since it's compounded monthly for 3 years, that's 36 periods.
The 5.6% is per year (it's not stated, but that's typical).
Amt = $6000*(1 + 0.056/12)^36
= $7094.85
Answer by jim_thompson5910(35256) (Show Source): You can put this solution on YOUR website!
First, since this balance is compounded monthly, the value of 'n' is (not 365) since 'n' is the number of times the balance is compounded annually.

Start with the compound interest formula

Plug in (initial investment), (this is the decimal form of 5.6% interest), , and (3 years)

Divide 0.056 by 12 to get 0.00466667

Multiply the exponents 12 and 3 to get 36

Add 1 and 0.00466667 to get 1.00466667

Raise 1.00466667 to the 36 th power to get 1.1824746

Multiply 6000 and 1.182474 to get 7094.8476

Round to the nearest cent.

So if you invest $6,000 at an interest rate of 5.6%, which is compounded 12 times a year for 3 years, the return is about $7,094.85 (which is rounded to the nearest cent)
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