Suppose you put in a savings account at an APR of 6% compounded monthly. Fill in the table below rounding your answers to the nearest cent. (Calculate the interest and compound it by hand each month rather than using the compound interest formula.)
Month Interest Earned Balance
$2000
1 $ $
2 $ $
3 $ $
To calculate the interest and compound it each month, you will need to follow these steps:
Step 1: Convert the annual percentage rate (APR) to a monthly interest rate.
APR is given as 6% compounded monthly, which means the interest is divided by 12 to get the monthly rate.
Monthly interest rate = APR / 12 = 6% / 12 = 0.5%
Step 2: Calculate the interest earned each month.
To calculate the interest earned, you need to multiply the monthly interest rate by the current balance.
For the first month:
Interest earned = Monthly interest rate * Current balance = 0.5% * $2000
Step 3: Calculate the new balance after adding the interest earned.
To get the new balance for each month, you need to add the interest earned to the previous balance.
For the first month:
New balance = Current balance + Interest earned = $2000 + (0.5% * $2000)
Now let's fill in the table:
Month Interest Earned Balance
$2000
1 $0.00 $2000.00
2 $ $
3 $ $
For the first month, the interest earned is $0.00, as it is the initial month and there is no interest yet.
To fill in the remaining rows, repeat steps 2 and 3 for each month.