Question

Clarence won $175,000 playing jeopardy and placed into an account that earns 7.25% interest compounded annually. Write an equation for the amount of money in his account after x years how much money will he have in his account after 20 years?

Answer 1

Explanation:

Initial amount that Clarence deposited into the account is $175,000 This means that the principal,

P = 175000

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 7.25%. So

r = 7.25/100 = 0.0725

It was compounded for x years. So

t = x

The formula for compound interest is

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

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

A = 175000 (1+0.0725/1)^1×x

A = 175000(1.0725)^x

The amount of money that he will have in his account after 20 years would be

A = 175000(1.0725)^20

A = $709552