Answer:
Interest in 5 years will be $1418.07 which is near about $1420
So option (D) will be correct answer
Explanation:
We have given amount invested, that is principal amount P = $5000
Rate of interest r = 5 %
Time taken t = 5 years
As interest is compounded monthly so rate of interest [tex]=\frac{5}{12}=0.416%[/tex]
And time period n = 12×5 = 60 period
So total amount after 5 year will be equal to
[tex]A=P(1+\frac{r}{100})^n[/tex]
[tex]A=5000(1+\frac{0.417}{100})^{60}[/tex]
[tex]A=5000\times 1.2836=6418.07[/tex]
We have to find the interest
Interest will be equal to = total amount - principal amount = $6418.07 - $5000 = $1418.07
Which is near about $1420 so option (D) will be correct answer
The interest amount equals $1,420.
The formula to derive the Future value is PV*(1 + i/m)^mn
Given Information
Present value = $5000
Rate of interest = 5 %
Time = 5 years
Compounded monthly = 12
Future value = $5,000 * (1+5%/12)^5*12
Future value = $5,000 * (1+0.004167)^60
Future value = $5,000 * (1.004167)^60
Future value = $5,000 * 1.28338423942
Future value = $6,416.9212
Future value = $6,416.92
Interest amount = Future value - Present value
Interest amount = $6,416.92 - $5,000
Interest amount = 1,416.92
Interest amount = $1,420
Therefore, the Option D is correct because the interest amount equals $1,420.
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