Question

of 1 Question 1 of 10 5Points You deposit $2000 in an account earning 8% interest compounded monthly. How much will you have in the account in 5 years? A. $979.69 OB. $2.979.69 C. $2.160.00 D. $16,000.00 Reset Selection

Answer 1

We would first calculate effective annual rate of interest
Effective rate of interest	(1+((r/n)^n)-1
r is the interest rate and n is number of coupounding
Effective rate of interest	(1+((0.08/12)^12)-1
Effective rate of interest	1.083-1
Effective rate of interest	8.30%
Calculation of future value of investment in 5 years
Future value	Present value*(1+r)^n
r is interest rate and n is number of years
Future value	2000*(1.083^5)
Future value	2000*1.489846
Future value	$2,979.69
Thus, future value is $2,979.69