what was the total in the account when her daughter turned 18?

Question

Rebecca put $34,000 in an education account on the day her daughter was born. If the account earned 5.95% interest compounded monthly, what was the total in the account when her daughter turned 18? Round the final answer to the nearest cent.

Answer 1

For this one you need the formula for compound interest:

 

A=P[1 + (r/n)]^(nt)

 

P is the amount you start with $34,000

 

r is the rate of the interest 5.95% (use .0595)

 

n is the number of times it is compounded per year. Monthly for this one so 12

 

t is the time 18 years for this one.

 

A = 34,000 [ 1 + (.0595/12)]^(12*18)

 

Use you calculator to get that answer.

 

Let me know if I need to explain any of that better or if you need help getting that final answer.

 

Kathy  :-)