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?

Question

120(1+0.005)+120

120(1+0.06)+120

120⋅2

120(1+0.005)2

Answer 1

The correct calculation to find the principal amount at the beginning of the second month is:

120(1+0.005)2

This formula takes into account the monthly compounding of interest by multiplying the principal amount ($120) by 1 + the monthly interest rate (0.005) and then raises it to the power of 2, representing the number of months.

Answer 2

so which answer choice is the answer?

Answer 3

Apologies for the confusion. The correct answer choice is:

120(1+0.005)2