A savings account earns 4% interest a year. When compounded monthly what would a $200 deposit earn in 3 years? (round to the nearest dollar)

A. 225

B. 230

C. 275

D. 245

Answer:aA

Answer: A. 225

Step-by-step explanation:

We would apply the formula for determining compound interest which is expressed as

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

Where

A = total amount in the account at the end of t years

r represents the interest rate.

n represents the periodic interval at which it was compounded.

P represents the principal or initial amount deposited

From the information given,

P = $200

r = 4% = 4/100 = 0.04

n = 12 because it was compounded 12 times in a year.

t = 3 years

Therefore,

A = 200 (1 + 0.04/12) ^12 * 3

A = 200 (1 + 0.0033) ^36

A = 200 (1.0033) ^36

A = $225