To find the principal amount at the beginning of the second month, you can use the formula for compound interest:
P = A / (1 + r/n)^(nt)
Where:
P = Principal amount at the beginning of the second month
A = Amount invested monthly ($120)
r = Annual interest rate (6%)
n = Number of times interest is compounded per year (12 for monthly compounding)
t = Number of years (1 month)
Plugging in the values into the formula:
P = 120 / (1 + 0.06/12)^(12*1)
Simplifying the calculation inside the parentheses:
P = 120 / (1 + 0.005)^(12)
Calculating the value inside the parentheses:
P = 120 / (1.005)^(12)
Finally, calculating the value of P:
P = 120 / 1.061678
P ≈ $112.98
Therefore, the principal amount at the beginning of the second month is approximately $112.98.
A total of $120 is invested monthly
with an annual compound interest
rate of 6%, compounded monthly.
Which of the following calculations
explains how you can find the
principal amount at the beginning of
the second month? (1 point)
1 answer