Chapter 7, Problem 65SGR

To determine

The final value.

Answer to Problem 65SGR

The final value is $3053.00.

Explanation of Solution

Given information: The principal amount is $2500, rate of interest is 2% 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 =annual rate of interest, n = number of compounding periods, t = the number of years.

Calculation:

In the problem given,

P = $2500, r = $2\%=\frac{2}{100}=0.02$ , n = 12, t =10 years

  $\begin{array}{l}$ A=P{(1+\frac{r}{n})}^{nt}$$ \Rightarrow A=2500{(1+\frac{0.02}{12})}^{12\times 10}$$ \Rightarrow A=2500{(1+\text{0}\text{.00166667})}^{120}$$ \Rightarrow A=2500{(1.\text{00166667})}^{120}$\Rightarrow A=2500(\text{1}\text{.2211999215296})\\ \Rightarrow A=\text{3052}\text{.999803824}\\ \Rightarrow A=3053.00\end{array}$

The final amount is $3053.00.