Question

How much would $200 invested at 7% interest compounded annually be

worth after 5 years? Round your answer to the nearest cent.
A(t) = P(1+5)

Answer 1

Explanation:

Initial amount invested in the account is $200 This means that the principal, P = $200

It was compounded annually. This means that it was compounded once in a year. So

n = 1

The rate at which the principal was compounded is 7%. So

r = 7/100 = 0.07

It was compounded for 5 years. So

t = 5

The formula for compound interest is

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

A = total amount in the account at the end of t years. Therefore

A = 200 (1+0.07/1)^1×5

A = 200(1.07)^5 = 200 × 1.402552

A = $280.51