Question

A customer deposits $500 in an account that pays 4% annual interest. what is the balance after 3 years if the interest is compounded annually? compound interest formula: mc017-1.jpg t = years since initial deposit n = number of times compounded per year r = annual interest rate (as a decimal)

Answer 1

The balance after 3 years if the interest is compounded annually is $562.432.

Explanation:

Given : A customer deposits $500 in an account that pays 4% annual interest.

To find : What is the balance after 3 years if the interest is compounded annually?

Solution :

The compound interest formula,

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

Where, A is the amount

P is the principal P=$500

r is the interest rate r=4%=0.04

t is the time t=3 years

n is number of times compounded per year n=1

Substitute the value in the formula,

`A = 500(1 +(0.04)/(1))^(1(3))`

`A = 500(1+0.04)^(3)`

`A = 500(1.04)^(3)`

`A =562.432`

`A =562.432`

Therefore, the balance after 3 years if the interest is compounded annually is $562.432.

Answer 2

Going to add on to your variables for the sake of the formula.

Let A = the amount after T years.
P = Principal amount


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


`A = 500(1 + (0.04)/(1))^(1(3))`


`A = 500(1 + (0.04)/(1))^(3)`


`A = 562.432` or ≈ $562.43

The customer would have $562.43 at the end of 3 years.