Question

Barry's savings account has a balance of $2874. After 9 years, what will the amount of interest be at 5% compounded annually? a. $1589.52 c. $1575.52 b. $1584.52 d. $1437.00

Answer 1

Option B.
`\$1,584.52`

Explanation:

we know that

The compound interest formula is equal to

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

where

A is the Final Investment Value

P is the Principal amount of money to be invested

r is the rate of interest in decimal

t is Number of Time Periods

n is the number of times interest is compounded per year

in this problem we have

`t=9\ years\\ P=\$2,874\\ r=0.05\\n=1`

substitute in the formula above

`A=\$2,874(1+(0.05)/(1))^(1*9)=\$4,458.52`

Find the interest

`I=A-P=\$4,458.52-\$2,874=\$1,584.52`