Question

you deposited $575 that you received for graduation into savings account that compounds annually. at the end of the first year you had $615 in the bank if you don't touch the money how much will you have when you graduate for college?( 4 years later)

Answer 1

`\$806.14`

Explanation:

we know that

The compound interest formula is equal to

`A=P(1+(r)/(n))^(nt)`

where

A is the Final Investment Value

P is the Principal amount of money to be invested

r is the rate of interest in decimal

t is Number of Time Periods

n is the number of times interest is compounded per year

Part 1)

Find the interest rate r

we have

`t=1\ years\\ P=\$575\\ r=?\\n=1\\A=\$615`

substitute in the formula above and solve for r

`\$615=\$575(1+(r)/(1))^(1*1)`

`\$615=\$575(1+r)`

`r=(615/575)-1\\ \\ r=0.07`

The interest rate is 7%

Part 2)

we have

`t=4\ years\\ P=\$615\\ r=0.07\\n=1\\A=?`

substitute in the formula

`A=\$615(1+(0.07)/(1))^(1*4)`

`A=\$615(1.07)^(4)=\$806.14`