The formula to calculate compound interest is:
A = P(1 + r/n)^(nt)
Where:
A = the future value of the investment/loan, including interest
P = the principal investment amount (the initial deposit or loan amount)
r = the annual interest rate (decimal)
n = the number of times that interest is compounded per year
t = the number of years the money is invested or borrowed for
Plugging in the given values:
P = $1,400
r = 7% or 0.07
n = 12 (compounded monthly)
t = 22 years
A = 1400(1 + 0.07/12)^(12*22)
A = 1400(1 + 0.00583)^(264)
A = 1400(2.083)^264
A = 1400(9.737)
A = $13,632.17
Therefore, the correct answer is not listed here. The closest answer is $6,501.27, which is not accurate. The actual future value after 22 years with a 7% interest rate compounded monthly on a $1,400 principal would be $13,632.17.
$1,400 principal earning 7%, compounded monthly, after 22 years
a
$1,591.11
b
$6,202.56
c
$395,472.00
d
$6,501.27
1 answer