Question

$2000 is invested at a rate of 4.2% compounded annually. Identify the compound interest function to model the situation. Then find the balance after 7 years. A = 2000(1.042)^t; $2667.50 A = 2000(1.42)^4t; $2557.50 A = 2000(1.042)^t; $2337.50 A = 2000(14.2)^4t; $2447.50

Answer 1

A = 2000(1.042)^t; $2667.50

Explanation:

The formula or model for Compound Interest is given as:

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

Where:

A = Amount or Balance after t years

P = Principal or initial amount invested = $2000

r = Interest rate = 4.2% = 0.042

t = Time in years = 7 years

n = Compounding frequency = Annually = per year = 1

Hence, the compound interest function to model for the situation (Question) with time t above is:

A = 2000(1 + 0.042) ^1 ×t

A = 2000(1.042)^t

Therefore solving for the balance

A = 2000(1.042)^7

A = 2,667.50

A = $2667.50

Therefore, option a =

A = 2000(1.042)^t; $2667.50

is the correct option.