Chapter 7, Problem 33PT

To determine

The amount of Lynn’s investment in 10 years.

Answer to Problem 33PT

The amount is $956.09.

Explanation of Solution

Given information: The principal amount is $500, rate of interest is 6.5% compounded monthly, number of year = 10.

Formula used: The compound interest formula is $A=P{(1+\frac{r}{n})}^{nt}$

Where, A = Total amount including interest, P = principal amount, r = rate of interest, n = number of compounding periods, t = the number of years.

Calculation:

In the problem given,

P = $500, r = $6.5\%=\frac{6.5}{100}=0.065$ , n = 12, t =10years

  $\begin{array}{l}$ A=P{(1+\frac{r}{n})}^{nt}$$ \Rightarrow A=500{(1+\frac{0.065}{12})}^{12\times 10}$$ \Rightarrow A=500{(1+\text{0}\text{.00541666}7)}^{120}$$ \Rightarrow A=500{(1.005416667)}^{120}$\Rightarrow A=500(\text{1}\text{.9121838282003357})\\ \Rightarrow A=\text{956}\text{.0919}\\ \Rightarrow A=\text{956}\text{.09}\end{array}$

The total amount is $956.09.

Option C is correct.