Question 4.P.3: A bank pays interest at the rate of 6% per year, compounded ......
A bank pays interest at the rate of 6% per year, compounded monthly. If a person deposits $2500 in a savings account at the bank, how much money will accumulate by the end of 2 years?
Step-by-Step
Equation (2.1), with the appropriate substitutions, gives
F/P = (1 + i)^n (2.1)
F = \$2500\left(1 + \frac{0.06}{12}\right)^{(12)(2)} = \$2500(1.005)^{24} = \$2817.89Alternatively, using the tables in Appendix A, we have
F = $2500(F/P, 0.5%, 24) = $2500(1.1272) = $2818.00
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