Suppose that $ 5 000 is invested at 3.9 % annual interest rate, compounded monthly. How much money will be in the account in (A) 8 months? (B) 24 years?

A. $6,333.85

B. $10,163.97

Explanation:

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

Where:

A = final amount

P = initial principal balance

r = interest rate

n = number of times interest applied per time period

t = number of time periods elapsed

Therefore in 8 months

P = $5000

r = 3.9%

n = 1

t = 8 months

A = P (1+r/n) ^nt = 5000 x (1 + (0.03/1) ^1 x 8 = $6,333.85

Therefore in 24 months

P = $5000

r = 3.9%

n = 1

t = 24 months

A = P (1+r/n) ^nt = 5000 x (1 + (0.03/1) ^1 x 24 = $10,163.97