Example Question - bank account

Compound Interest Calculation Over Time

<p>To calculate the total amount in the account using monthly compounding interest:</p> <p>1. Determine the monthly interest rate: </p> <p>r = \frac{5\%}{12} = \frac{0.05}{12} \approx 0.0041667</p> <p>2. Calculate the number of months for 2 years and 5 months: </p> <p>n = 2 \times 12 + 5 = 29</p> <p>3. Use the formula for compound interest:</p> <p>A = P(1 + r)^n</p> <p>A = 4300(1 + 0.0041667)^{29}</p> <p>4. Simplify:</p> <p>A \approx 4300(1.127493) \approx 4858.99</p> <p>5. Round to the nearest penny: </p> <p>A = £4858.99</p>