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Question:

An investor places $5,000 in an account. The stated annual interest rate is 6% compounded monthly. The value of the account at the end of three years is closest to:

A
$5,983.

Explaination

With more than one compounding period per year, $7448_w177_h35.png$

PV = $5,000; r = 6%; m = 12; $3723_w130_h39.png$ ;n = 3;mx n=12 x3 = 36.

To compute FV3, enter PV = -5,000; I = 0.5; PMT = 0; and N = 36 to get $5,983.40.

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