Suppose you invest $1000 in a savings account that pays an APR of 6%. If the account pays simple interest, what is the balance in the account after 20 years? (Round your answer to the nearest cent.) If interest is compounded monthly, what is the balance in the account after 20 years? (Round your answer to the nearest cent.)

The balance after 20 years will be 1,300,000cents

The balance in the account after 20 years if compounded monthly is 12,173,957,374cents

The formula for calculating simple interest is expressed as:

SI = PRT

P is the amount invested = $1000

R is the rate (in decimal) = 6% = 0.06

T is the time in years = 20 years

Get the simple interest

SI = 1000 * 0.6 * 20

SI = $12,000

The balance after 20 years will be $1,000 + $12,000 = $13,000

The compound amount formula is expressed as:

A = P(1 + r/t)^nt

A = 1000(1+0.6/12)^12(20)

A = 1000(1+0.05)^240

A = 1000(1.05)^240

A = 121,739,57374cents

Hence the balance in the account after 20 years is 12,173,957,374cents

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Step-by-step explanation:

Simple interest formula:

A = P(1 + rt)

   A = the future value of the investment/loan, including interest

   P = the principal investment amount (the initial deposit or loan amount

   I = Interest Amount

   r = Rate of Interest per year in decimal; r = R/100

   t = Time Period involved in months or years

P = $1000

r = 6% = 6/100 = .06

t = 20

A = P(1 + rt)

A = 1000(1 + (.06*20))

A = 1000 (1 + 1.2)

A = 1000 (2.2)

A = $2200

Compounded monthly:

A = P(1 +

   A = the future value of the investment/loan, including interest

   P = the principal investment amount (the initial deposit or loan amount)

   r = Rate of Interest per year in decimal; r = R/100

   n = the number of times that interest is compounded per unit t

   t = Time Period involved in months or years

P = $1000

r = 6% = 6/100 = .06

n = 12

t = 20

A = P(1 +

A = 1000 ( 1 +

A = 1000 (1 + .005

A = 1000 ( 1.005

A = 1000 (3.3102)

A ≈ $3310.20