Question

Young has $150.00 in a savings account that earns 5%

interest, compounded annually.
What will the balance be after 1 year?
Round to the nearest cent.
S

Answer 1

Simple you earn 5% each yearn on your money so 10% of 150 is 15 split it in half to get 5% $7.50 add that to his original money then you got $157.50

Answer 2

$157.50

Explanation:

The equation you use for compound interest is:

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

where:

A = final amount

P = initial principal balance

r = interest rate

n = number of times interest applied per time period

t = number of time periods elapsed

So for this question,

150 is our initial balance = P

5% is our interest rate = r

n = 1 because the interest is compounded annually per 1 year so 1 per year

t = 1 because we are calculating the balance after 1 year

Now we can plug these in and solve for the final amount (A).

`A = 150 ( 1 + (0.05)/(1))^(1 * 1)`

remember that 5% is 5/100 so we put 0.05 for r

`A = 150 (1.05)^(1)`

A = 150 (1.05)

A = 157.5