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?

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

3 answers

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.
you're positive this is correct?
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.