Solve the given problem related to compound interest.

Question

If $5250 is invested at an annual interest rate of 6.5% for 40 years, find the balance if the interest is compounded on the following basis. (Round your answers to the nearest cent. Assume a year is exactly 365 days.)

Compound interest (a) monthly (b) daily

Answer 1

Hi Bella,

This formula can be used:

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

Where A is the resulting amount

P is the Principal (initial deposit)

r is the interest rate as a decimal number

n is the number of compounding period in a year

t is the number of years

Hint: Compounding Daily should result in a balance higher than compounding Monthly