Question

A customer deposits $500 in an account that pays 4% annual interest. What is the balance after 3 years if the interest is compounded annually?

Compound interest formula:
t = years since initial deposit
n = number of times compounded per year
r = annual interest rate (as a decimal)
P = initial (principal) investment
V(t) = value of investment after t years

A. $500.12
B. $512.00
C. $560.00
D. $562.43

Answer 1

I believe the answer is D

Answer 2

Option D

Explanation:

The compounded interes formula states that:

V(t) = P (1 + r/n)^ (nt)

t = years since initial deposit = 3

n = number of times compounded per year 1

r = annual interest rate (as a decimal) = 4% / 100 = 0.04

P = initial (principal) investment = $500

Then V(t) = $500 ( 1 + 0.04/1)^3 = 562,43

So the correct answer is option D.