I've been stuck on this for a long time please help!

Question

assume $5000 is deposited in an account that pays 6% annual interest. How much more would be in the account after 25 years if it were compounded monthly rather than quarterly?

Answer 1

For a problem like this you would use the equation

A = P (1 + ^r/_n)^nt

A is the amount

P is the principal (the amount of money you start with)

r is the rate (expressed as a number, not a percent! For example 0.05 and not 5%)

n is the number of times each year the interest is compounded

t is the number of years

So in this problem

P = 5000

r = .06

t = 25

For monthly, n = 12. For quarterly, n = 4

You would have to use the top equation twice and see the difference to find how much more there would be if it were monthly instead of quarterly.