Question

A financial adviser recommends that a client deposit 2500 into a fund that earns 7.5% annual interest compounded monthly. What will be the value of the investment after 3 years? Round to the nearest cent.

Answer 1

The formula needed for this is:
$A=P(1+\frac{r}{n})^{nt}$
where n is the number of compounding periods in one year.
Plugging the given values into the formula we get:
$A=25001+\frac{0.075}{12})^{(12\times3)}=3128.62$

Answer 2

The value of the investment after 3 years will be $ 3,128.61.

Given that a financial adviser recommends that a client deposit 2500 into a fund that earns 7.5% annual interest compounded monthly, to determine what will be the value of the investment after 3 years the following calculation must be performed:

• 2500 x (1 + 0.075 / 12) ^ (12x3) = X
• 2500 x 1.00625 ^ 36 = X
• 2500 x 1.25 = X
• 3,128.61 = X

Therefore, the value of the investment after 3 years will be $ 3,128.61.

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