Answer: $11,369.74
Note: you may need to leave off the dollar sign and leave off the comma if you are typing the answer into a computer system.
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Explanation:
We'll use the compound interest formula
A = P*(1+r/n)^(n*t)
The variables are:
- A = account balance after t years
- P = deposit amount or principal
- r = interest rate in decimal form
- n = number of times the money is compounded per year
- t = number of years
In this case, we know the following values:
- P = 9500 is the deposit amount
- r = 0.045 since 4.5% = 4.5/100 = 0.045
- n = 12 because we're compounding monthly or 12 times a year
- t = 4 is the number of years
They are all plugged into the formula mentioned to get
A = P*(1+r/n)^(n*t)
A = 9500*(1+0.045/12)^(12*4)
A = 11369.7365854849
A = 11,369.74
After 4 years, there will be $11,369.74 in the account.
Side note: The info that "assume 360 days in a year" would only apply if we were compounding daily.
