If they invest it all at 8.25% with interest compounded monthly, determine the value of the account, in dollars and cents, after 5 years.

Question

The Franklins inherited $3,500, which they want to invest their child's future college expenses. If they invest it all at 8.25% with interest compounded monthly, determine the value of the account, in dollars and cents, after 5 years. Use te formula A=(1+r/n)nt, where A=value of the investent after t years, P=principle invested, r=annual interest rate, and n=number of times compunded per year.

Answer 1

Here is the formula to get the answer:

 

Value of account = $3,500 * (1 + 0.0825/12) ^12(5)

 

V = $3,500 * 1.006875^60

 

V = $3,500 * 1.50846

 

V = $5,279.61