Question

How much money would a person have 8 years after they invested $2,000 into an account that has an annual interest rate of 3% that compounds every other month?

Answer 1

The amount of money the person would have in 8 years s $2541.74.

How much would the person have in 8 years?

The formula for calculating future value is:

FV = P (1 + r)^nm]

Where:

FV = Future value

• P = Present value = $2000
• R = interest rate = 3% / 12 = 0.25%
• m = number of compounding = 12
• N = number of years = 8 years

Value of the account in 8 years with monthly compounding = $2000(1.0025)^(12 x 8) = $2541.74

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