Question

You are opening a savings account with $500 that you have saved. The bank offers 3.2% interest, compounded yearly. How much money will you have in you account after 7 years?

Answer 1

You will have $623.3441462 in your account after 7 years

Explanation:

The formula of the compounded interest is A = P
`(1+(r)/(n))^(nt)` , where

• A is the new value

• P is the initial value

• r is the rate in decimal

• n is the number of periods

• t is the time in years

∵ You are opening a savings account with $500

∴ P = 500

∵ The bank offers 3.2% interest, compounded yearly

∴ r = 3.2% ⇒ divide it by 100 to change it to decimal

∴ r = 3.2 ÷ 100 = 0.032

∵ The interest is compounded yearly

∴ n = 1

∵ The time is 7 years

∴ t = 7

→ Substitute these values in the rule above to find A

∵ A = 500
`(1+(0.032)/(1))^(1(7))`

∴ A = 500
`(1.032)^(7)`

∴ A = 623.3441462

∴ You will have $623.3441462 in your account after 7 years