An investment is advertised as returning 0.5% every month, compounded monthly. If $20,000 is invested, the growth can be modeled by the equation A(t) = 20,000(1.005)^12t. What is the equivalent annual growth rate for this investment (rounded to the nearest hundredth of a percent) and what is it worth (rounded to the nearest hundred dollar) after 25 years?
Hint: Find the value of 1.005^12 on your calculator.
An investment is advertised as returning 0.5% every month, compounded monthly. If $20,000 is invested, the growth can be modeled by the equation A(t) = 20,000(1.005)^12t. What is the equivalent annual growth rate for this investment (rounded to the nearest hundredth of a percent) and what is it worth (rounded to the nearest hundred dollar) after 25 years?
Hint: Find the value of 1.005^12 on your calculator.
The equivalent annual growth rate is 6% compounded monthly=6.17% effective annual rate.
The $20,000 investment would be worth $89,299.40 after 25 years @ 6% comp. monthly
Hint: Find the value of 1.005^12 on your calculator.=1.0617 - 1 X 100=6.17%
