Question

You invest $1,300 at a 6% annual interest rate, stated as an APR. Interest is compounded monthly. How much will you have in 1 year? In 1.5 years? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Answer 1

1.Amount at the end of 1 year:

Present value= $1,300

Interest rate= 6%/12= 0.50%

Time= 1 year*12= 12 months

The amount at the end of 1 year is calculated with the help of a financial calculator.

The below has to be entered in a financial calculator:

PV= -1,300; N= 12; I/Y= 0.50

Press CPT and FV to calculate the amount at the end of 1 year

The amount at the end of 1 year is $1,380.18.

2. Amount at the end of 1.5 year:

Present value= $1,300

Interest rate= 6%/12= 0.50%

Time= 1.5 year*12= 18 months

The amount at the end of 1.5 year is calculated with the help of a financial calculator.

The below has to be entered in a financial calculator:

PV= -1,300; N= 18; I/Y= 0.50

Press CPT and FV to calculate the amount at the end of 1 year

The amount at the end of 1.5 years is $1,422.11.