In: Finance
Suppose you deposited $50,000 in a bank account that pays 8.25% with monthly compounding. How much would be in the account after 7 months?
Calculation of Return on investment after 7 months Compounded Monthly | ||||||||
Per the information provided in the question, we noted that | ||||||||
Present value of amount deposited (p) = $50,000 | ||||||||
Return on investment (r) =8.25% (or) 0.0825 | ||||||||
No. of times interest is compounded (n) =12, (i.e. Being monthly compounding hence 12 times per year) | ||||||||
The period for which amount is invested (t) = 7/12 (Being invested for 7 months) | ||||||||
The future value of investment (FV) = ? | ||||||||
Therefore Return on investment | ||||||||
FV = P(1+r/n)^tn | ||||||||
FV = 50,000(1+0.0825/12)^(7/12)*12 | ||||||||
FV = 50,000 (1+0.006875)^7 | ||||||||
FV = 50,000 (1.006875)^7 | ||||||||
FV = 50000(1.049129) | ||||||||
Hence FV = $52,456.45 | ||||||||