You deposit $2000 in an account earning 8% interest compounded monthly. How much will you have in the account in 5 years?
To calculate the amount in the account after 5 years, using compound interest, we can use the formula:
A = P(1 + r/n)^(nt)
Where:
A = The future value of the investment/loan, including interest
P = The principal investment amount (initial deposit)
r = Annual interest rate (as a decimal)
n = Number of times that interest is compounded per year
t = Number of years the money is invested/borrowed for
Given:
P = $2000
r = 8%, which is 0.08 as a decimal
n = 12 (compounded monthly)
t = 5
Now let's calculate the future value:
A = 2000(1 + 0.08/12)^(12*5)
≈ 2000(1 + 0.0066667)^60
≈ 2000(1.0066667)^60
≈ $3067.36
Therefore, you will have approximately $3067.36 in the account after 5 years.