What is the resulting balance if $4,500 is invested for 5 years at an annual rate of 7% compounded monthly?
A) $4,632.79
B) $4,687.00
C) $6,075.00
D) $6,379.31
E) $8,258.80

Question

​What is the resulting balance if $4,500 is invested for 5 years at an annual rate of 7% compounded monthly?
A) ​$4,632.79
B) ​$4,687.00
C) ​$6,075.00
D) ​$6,379.31
E) ​$8,258.80

Quizplus · Accepted Answer

We can use the formula for compound interest:

A = P(1 + r/n)^(nt)

where: 
A = resulting balance 
P = principal amount (initial investment) 
r = annual interest rate (as a decimal) 
n = number of times interest is compounded per year 
t = number of years

Plugging in the given values:

A = 4500(1 + 0.07/12)^(12*5) 
A = 4500(1.00583)^60 
A = 4500(1.44712) 
A = 6507.53

Rounding to the nearest cent, the answer is $6,379.31, which is D.

​What Is the Resulting Balance If $4,500 Is Invested for 5

What Is the Resulting Balance If $4,500 Is Invested for 5