SOLUTION: $2000 is deposited in an account that pays 8% annual interest compounded monthly. What is the balance in five years?

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Question 709996: $2000 is deposited in an account that pays 8% annual interest compounded monthly. What is the balance in five years?
Answer by jim_thompson5910(35256) About Me  (Show Source):
You can put this solution on YOUR website!

A=P%281%2Br%2Fn%29%5E%28n%2At%29 Start with the compound interest formula


A=2000%281%2B0.08%2F12%29%5E%2812%2A5%29 Plug in P=2000, r=0.08 (the decimal equivalent of 8%), n=12 and t=5.


A=2000%281%2B0.00666666666666667%29%5E%2812%2A5%29 Evaluate 0.08%2F12 to get 0.00666666666666667


A=2000%281.00666666666667%29%5E%2812%2A5%29 Add 1 to 0.00666666666666667 to get 1.00666666666667


A=2000%281.00666666666667%29%5E%2860%29 Multiply 12 and 5 to get 60.


A=2000%281.48984570830161%29 Evaluate %281.00666666666667%29%5E%2860%29 to get 1.48984570830161.


A=2979.69141660321 Multiply 2000 and 1.48984570830161 to get 2979.69141660321.


A=2979.69 Round to the nearest hundredth (ie to the nearest penny).


So the balance will be $2,979.69 in five years.