A savings account offers an annual interest rate of 2.5%, compounded monthly. You deposit $1,000 into this account and don't make any additional deposits or withdrawals. How much money will be in the account after 3 years? To solve this, we need to use the compound interest formula: A = P(1 + r/n)^(nt), where A is the final amount, P is the principal (initial deposit), r is the annual interest rate, n is the number of times interest is compounded per year, and t is the number of years. In this case, P = $1,000, r = 0.025 (2.5% expressed as a decimal), n = 12 (compounded monthly), and t = 3 years. Let's calculate the result.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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A savings account offers an annual interest rate of 2.5%, compounded
monthly. You deposit $1,000 into this account and don't make any
additional deposits or withdrawals. How much money will be in the
account after 3 years? To solve this, we need to use the compound
interest formula: A = P(1 + r/n)^(nt), where A is the final amount, P is
the principal (initial deposit), r is the annual interest rate, n is the
number of times interest is compounded per year, and t is the number
of years. In this case, P = $1,000, r = 0.025 (2.5% expressed as a
decimal), n = 12 (compounded monthly), and t = 3 years. Let's
calculate the result.
Transcribed Image Text:A savings account offers an annual interest rate of 2.5%, compounded monthly. You deposit $1,000 into this account and don't make any additional deposits or withdrawals. How much money will be in the account after 3 years? To solve this, we need to use the compound interest formula: A = P(1 + r/n)^(nt), where A is the final amount, P is the principal (initial deposit), r is the annual interest rate, n is the number of times interest is compounded per year, and t is the number of years. In this case, P = $1,000, r = 0.025 (2.5% expressed as a decimal), n = 12 (compounded monthly), and t = 3 years. Let's calculate the result.
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