Question

At the time of her grandson's birth, a grandmother deposits $11,000 in an account that pays 5.5% compounded monthly. What will be the value of the account at the child's twenty-first birthday, assuming that no other deposits or withdrawals are made during this period?round to the nearest dollar

Answer 1

Remember the formula for compound interest is:

$S=I(1+r)^n$

Where:

• S ,is the total amount saved in the account

,

• I ,is the initial amount that was saved

,

• r ,is the interest rate

,

• n, is the number of times the interest is compounded

Using the data given, and taking into account that 21 years are 252 months,

$\begin{gathered} S=11000(1+\frac{5.5}{100})^{252} \\ \rightarrow S=7,961,822,896 \end{gathered}$