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7 January, 16:00

Suppose you deposit $1000 in a savings account that compounds interest monthly. What is your account balance after 25 years if the interest rate is 3%?

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  1. 7 January, 19:37
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    The balance is computed from

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

    where P is the principal, r is the annual interest rate, n is the number of times per year interest is compounded, and t is the number of years.

    A = 1000 (1 +.03/12) ^ (12*25) ≈ 2115.02

    The account balance after 25 years will be $2,115.02.
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