Question

Jerry says I've got my money in a great account that compounds interest monthly. The equation y=388 (1.008) represents how much money I have at the end of the month. What is Jerry 's monthly interest rate? What is his annual interest rate? Write an equation to represent your total money if you invest $500 in an account with the same rate of return .Let m represent the number of months the money has been invested

Answer 1

(a)His monthly Interest Rate=0.8%

(b)Annual Interest Rate = 9.6%

(c)
`500(1.008)^m`

Explanation:

For a Principal P invested at a yearly rate r, compounded m times in t years

Amount at Compound Interest=
`P(1+(r)/(m))^(mt)`

Comparing with Jerry's equation y=388 (1.008)

(a)His monthly Interest Rate= 0.008=0.8%

(b)Annual Interest Rate= Monthly Interest Rate X 12 =0.8 X 12 = 9.6%

(c)If I invest $500 at the same rate of return,

Total Money after m months

=
`P(1+(r)/(m))^(mt)`
`=500(1+0.008)^(m)`
`=500(1.008)^m`