Question

Mandy deposited $80 in a savings account earning 5% interest, compounded annually. To the nearest cent, how much will she have in 2 years?

Answer 1

$88.20

Explanation:

We will use compound interest formula to answer this problem.

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

A= Amount after t years.

P= Principal amount.

r= Interest rate (decimal)

n=Period of compounding

t= Time.

Upon substituting our given values in above formula we will get,

`A=80(1+(0.05)/(1))^(1* 2)`

`A=80(1+0.05)^(2)`

`A=80(1.05)^(2)`

`A=80* 1.1025`

`A=88.2`

Therefore, Mandy will earn $88.20 in 2 years.