Question

John deposited $80 in a savings account earning 5% interest, compounded annually. To the nearest whole dollar, how much interest will he earn in 3 years?

Answer 1

The interest is equal to
`\$13`

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

in this problem we have

`t=3\ years\\ P=\$80\\ r=0.05\\n=1`

substitute in the formula above

`A=\$80(1+(0.05)/(1))^(3)=\$92.61`

Find the interest

`I=A-P=\$92.61-\$80=\$12.61`

Round to the nearest whole dollar

`\$12.61=\$13`