Question

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) PLEASE HELP ME!!!!!

A. 245
B. 230
C. 275
D. 225

Answer 1

225 will be the future value

Explanation:

Monthly , 3 years = 36 periods

4% = .04 in decimal .04/12 = monthly period interest

future value = 200 ( 1 + .04/12)^36 = 225.45

subtract the orignal deposit to get the interest gained

Answer 2

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

P = $200

r = 4% = 0.04

n = 12 -Amount of months in a year

t = 3 years

A = 200(1 + 0.04/12)^12 × 3

A = 200(1 + 0.0033)^36

A = 200(1.0033)^36

A = $225