Question

What is the future value of $6000 earning 12% interest, compounded monthly, for 4 years? (Round your answer to two decimal places.)

Answer 1

Given:

The principal amount is P = $6000.

The rate of interest is r = 12% = 0.012.

The number of years is t = 4.

For monthly compound interest, n = 12 per year.

The objective is to find the future value.

Explanation:

The general formula for compound interest is,

$A=P(1+\frac{r}{n})^{nt}\text{ . . . . . . .(1)}$

Substitute the given values in equation (1).

$\begin{gathered} A=6000(1+\frac{0.012}{12})^{12(4)} \\ =6000(1+0.01)^{48} \\ =9673.356466\ldots. \\ \approx9673.36 \end{gathered}$

Hence, the future value is $9673.36.