At the time of her grandson's birth, a grandmother deposits $1000 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?

Question

Byron Woodard

Business

8 June, 20:31

At the time of her grandson's birth, a grandmother deposits $1000 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?

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Answers (1)

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Mohamed Douglas · Answer 1

8, 540.00

Explanation:

To calculate the balance at 21 years, we apply the future value formula.

FV = PV * (1+r) n

Where FV is the future value

PV is 3000

r is 5% or 0.05 % per year or 0.00416 per month

n is 21 years or 252 months

FV = 3000 x (1 + 0.00416) 252

FV = 3000 x 2.84665756

FV = 8, 539.97

FV = 8, 540.00