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

a. 120(1+0.005)^2
b. 210*2
c. 120(1+0.005)+120
d. 120(1+0.06)+120

Answer 1

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

a. 120(1+0.005)^2

This calculation takes the principal amount of $120 and multiplies it by (1+0.005) raised to the power of 2, which accounts for the compounded interest over the first two months.

Answer 2

you're positive this is correct?

Answer 3

Apologies for the incorrect response. My mistake. The correct calculation to find the principal amount at the beginning of the second month is:

c. 120(1+0.005)+120

This calculation takes the principal amount of $120, adds the interest earned from the first month (120 * 0.005), and adds the monthly investment of $120 for the second month. This gives the total amount at the beginning of the second month, which will serve as the new principal.