Question

Old Time Savings Bank pays 4% interest on its savings accounts. If you deposit $1,000 in the bank and leave it there: a. How much interest will you earn in the first year? b. How much interest will you earn in the second year? c. How much interest will you earn in the 10th year?

Answer 1

Answer: The answer is as follows:

Step-by-step explanation:

Given that,

Deposits = $1000

Interest rate = 4%

(a) Compound interest = principal ×
`(1 + (R)/(100))^(n)`

= 1000 ×
`(1 + (4)/(100))^(1)`

= $1040

Therefore, interest earned in the first year is $40.

(b) Compound interest = principal ×
`(1 + (R)/(100))^(n)`

= 1000 ×
`(1 + (4)/(100))^(2)`

= $1081.6

Therefore, interest earned in the second year is $41.6.

(c) Compound interest = principal ×
`(1 + (R)/(100))^(n)`

= 1000 ×
`(1 + (4)/(100))^(10)`

= $1,480.244

Above is the interest earned in the tenth year.