Question

You have deposited $40,000 in account for 10 years at 5.5% compounded monthly. What would be your balance after 10 years?

Answer 1

Here we will use the following formula:

FV = PV * (1 + r%)ⁿ

where, FV = Future value, PV = Present value = $40000, r = rate of interest = 5.5% compounded monthly, so monthly rate = 5.5% / 12 = 0.4583333%,  n= time period = 10 * 12 = 120 months

now, putting theses values in the above equation, we get,

FV = $40000 * (1 + 0.4583333%)¹²⁰

FV = $40000 * (1 + 0.004583333)¹²⁰

FV = $40000 * (1.004583333)¹²⁰

FV = $40000 * 1.73107641707

FV = $69243.03

So, after 10 years the balance will be $69243.03.