# Compounded monthly

• Nov 30th 2012, 09:46 AM
itgl72
Compounded monthly
Getting the wrong answer with this problem.

Find the accumulated value of an account of $800 at 8% compounded monthly for 2 years. I keep getting the answer$933.12 which is wrong.

Im using the formula A=P(1 + r/t) ^nt
• Nov 30th 2012, 09:50 AM
Scopur
Re: Compounded monthly
$A = 800\left( 1 + \frac{0.08}{12} \right)^{24} =938.31$
• Nov 30th 2012, 01:54 PM
ebaines
Re: Compounded monthly
^This.

Quote:

Originally Posted by itgl72
I keep getting the answer $933.12 which is wrong. What you calculated was for interest compunded annually (not monthly) for two years: $800 \left(1+\frac {0.08} 2 \right)^2 = 933.12$. Scopur shows how to do it compounding monthly. • Nov 30th 2012, 02:55 PM HallsofIvy Re: Compounded monthly Quote: Originally Posted by itgl72 Getting the wrong answer with this problem. Find the accumulated value of an account of$800 at 8% compounded monthly for 2 years.

I keep getting the answer \$933.12 which is wrong.

Im using the formula A=P(1 + r/t) ^nt

There's your problem! The formula is $P(1+ r/n)^{nt}$
r is annual interest and you are compounding monthly. If the annual interest is 8%= .08, then the monthly interest is $\frac{.08}{12}= 0.006667$.