Question

Chapter 6 Saved Help Save & Exit You are going to deposit $2,700 in an account that pays 33 percent interest compounded monthly. How much will you have in 7 years? Multiple Choice O $3.560.84 O s237259 O $3554 40 53.5490 < Prev 4 of 30 baxt >

Answer 1

Answer:

Amount available after the term of the loan, along with compound interest is the Future Value arrived at using the following formula:

F= P*[(1+r)^n]

Where F= Future Value, P = Principal (initial deposit), r= rate of interest for the period (in decimals) and n= number of times of compounding.

In the given problem,

Principal (P)= $2,700

Rate of interest per month is 0.33%. Hence r=0.33/100 = 0.0033

Period of deposit is 7 years and Compounding frequency is monthly. Hence n=7*12 = 84

Therefore, Future Value F= $2,700*(1+0.0033)^84

1+0.0033= 1.0033.

1.0033^84= 1.318828

2,700 * 1.318828 = 3560.836171

Therefore, amount available in the account after 7 years will be $3,560.84

The first choice given in the answer set is the correct answer.