Calculate the future value of a 3-year investment of RM5,000 that earns 6% interest,
compounded monthly.

To calculate the future value of an investment compounded monthly, we use the formula for compound interest:

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

Where:
- \(A\) = future value of the investment
- \(P\) = principal amount (initial investment)
- \(r\) = annual interest rate (decimal)
- \(n\) = number of times the interest is compounded per year
- \(t\) = time in years

In this case:
- \(P = 5,000\) RM
- \(r = 0.06\) (6% interest)
- \(n = 12\) (monthly compounding)
- \(t = 3\) years

Now, let’s calculate the future value.

\[
A = 5000 \left(1 + \frac{0.06}{12}\right)^{12 \times 3}
\]The future value of the 3-year investment of RM5,000, earning 6% interest compounded monthly, is approximately **RM5,983.40**.

Would you like further details or have any questions?

Here are 5 related questions to expand on this topic:
1. How does the future value change if the interest is compounded quarterly instead of monthly?
2. What would the future value be if the investment period was extended to 5 years?
3. How does continuous compounding compare to monthly compounding for this scenario?
4. What is the formula for compound interest if the interest rate varies annually?
5. What would happen if the principal was increased to RM10,000?

**Tip:** Increasing the compounding frequency (e.g., from yearly to monthly) generally results in a higher future value for the same interest rate.

Calculate the future value of a 3-year investment of RM5,000 that earns 6% interest, compounded monthly.

Learn how to calculate the future value of a 3-year RM5,000 investment with 6% interest compounded monthly. This financial mathematics problem explains key concepts like compound interest, exponential growth, and includes a step-by-step solution using the compound interest formula. Suitable for students in Grades 9-12.

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