The present value of the money in your savings account is $420, and you're receiving 3% annual interest compounded monthly. What is the future value in two months?
A=P( 1+r/100)^n
A= 420 ( 1+3/100 )^2/12
A= 420 ( 1.03 ) ^ 0.17
A=$422.12
424.11
5. The present value of the money in your savings account is $420, and you're receiving 3% annual interest compounded monthly. What is the future value in two months?
A. $424.11
B. $426
C. $422.10
D. $432.60
424.11
To find the future value of the money in your savings account in two months, with monthly compounding interest, we can use the formula for compound interest:
Future Value = Present Value * (1 + Interest Rate)^(Number of Periods)
Here's how to calculate it step by step:
1. Convert the annual interest rate to a monthly interest rate.
Monthly Interest Rate = Annual Interest Rate / Number of Compounding Periods per Year
In this case, the number of compounding periods per year is 12 (monthly compounding).
Monthly Interest Rate = 3% / 12 = 0.03 / 12 = 0.0025 (or 0.25%)
2. Calculate the future value.
Future Value = $420 * (1 + 0.0025)^(2)
Note: The number of periods is 2 because we're calculating the future value in two months.
Evaluating the equation:
Future Value = $420 * (1.0025)^(2)
Future Value = $420 * 1.0050125
Future Value = $421.25525
Therefore, the future value of the money in your savings account after two months will be approximately $421.26.