You invest $800 in a savings account that earns 2.5% annual interest compounded monthly. How much money is in the account after 3 years?

Answer :

In order to calculate the final amount of money, let's use the following formula:

[tex]P=P_0(1+\frac{i}{n})^{nt}[/tex]

Where P is the final value after t years, P0 is the initial value, i is the annual interest and n depends on the compound period (for monthly, we have n = 12).

Using P0 = 800, i = 0.025, t = 3 and n = 12, we have that:

[tex]\begin{gathered} P=800(1+\frac{0.025}{12})^{12\cdot3} \\ P=800\cdot1.0778 \\ P=862.24 \end{gathered}[/tex]

So the amount of money after 3 years is $862.24.