Question

Practice Exercise 3-Q2A: If $500 were deposited in a bank savings account, how much would be in the account three years from now if the bank paid 6% interest compounded annually

Answer 1

$595.50

Step-by-step explanation:

According to the scenario, given data are as follows:

Present value (p) = $500

Time period (n) = 3 years

Rate of interest (r) = 6%

We can calculate the future value by using following formula:

FV = P× (1+r)^n

By putting the value, we get

FV = $500 × (1 + 0.06)^3

= $500 × (1.06)^3

= $595.50

Hence, the future value after three years will be $595.50.