Question

Suppose you deposit 2000 in a savings account that pays interest at an annual rate of 4%. If no money is added or withdrawn determine how much will be in the account after 3 years.

Answer 1

In the account will be $2249,73 after 3 years.

Explanation:

Suppsing that is an effective compound interest:

1. Data:

Deposit (P)= $2000

Interest (i)= 4%

Number of years (t) = 3

2. Formula:

You need to apply the compound interest formula that is defined as follows:

`A=P(1+i)^(t)`

Where, A is the Future Value of the deposit (P) with an interest (i) for the number of years (t)

3. Replace values and solve:

`A=P(1+i)^(t)\\A=2000(1+0.04)^(3)\\A=$2249,73`

4. Answer

In the account will be $2249,73 after 3 years.

Answer 2

2,240 dollars.

Explanation:

Given is the Principal amount invested as P = 2,000 dollars.

Given is the Rate of Interest as R = 4% = 0.04

Given is the Time period of investment as T = 3 years.

We know the simple interest formula is given as follows:-

Simple Interest = Principal amount x Rate of interest x Time.

S.I. = P*R*T = 2000 x 0.04 x 3 = 240 dollars.

Account Balance = Principal amount + Interest amount.

Balance = 2000 + 240 = 2,240 dollars.

Hence, the account balance after 3 years would be 2,240 dollars.