This is a problem involving compound interest. The formula for compound interest is:

$A = P \left(1 + \frac{r}{n}\right)^{nt}$

Where:

• $A$ = the future value of the investment/loan, including interest
• $P$ = the principal investment amount ($2500 in this case)
• $r$ = the annual interest rate (decimal form, so 5% = 0.05)
• $n$ = the number of times that interest is compounded per year (12 for monthly compounding)
• $t$ = the number of years the money is invested or borrowed (4 years here)

Substituting the values:

• $P = 2500$
• $r = 0.05$
• $n = 12$
• $t = 4$

The formula becomes: $A = 2500 \left(1 + \frac{0.05}{12}\right)^{12 \times 4}$

Let me calculate this. Given values P = 2500 # Principal amount r = 0.05 # Annual interest rate (5% as decimal) n = 12 # Compounding frequency (monthly) t = 4 # Time in years

Compound interest formula calculation

A = P * (1 + r / n) ** (n * t) AAfter 4 years, the account will have approximately $3052.24.

Would you like to see detailed steps or have any further questions?

Here are some related questions you might find helpful:

1. What is the difference between simple interest and compound interest?
2. How does the frequency of compounding affect the final amount?
3. What happens if the interest rate is compounded quarterly instead of monthly?
4. How can you calculate the time required to double the investment with a given interest rate?
5. What is the formula for continuous compounding, and how does it differ from periodic compounding?

Tip: Always convert the interest rate into a decimal before using it in calculations!