Question

If you deposit $900 today, how

much will be in the account in
12 years if yearly interest is
4.25% compounded monthly?

Answer 1

900(1.00354)^144= $1497.41

Explanation:

Yearly rate is 4.25%

So monthly rate is 4.25%/12 = 0.354%

Because money is compounded monthly, the monthly rate is how much on top of your principle you will get each month. So at the end of the month you will get 1.00354 times the starting monthly value.

You begin with 900

So 900(1.00354) but you get the interest and compound the principle each month and do that for 12 years, that is 144 total times (12x12). So

900(1.00354)^144