Question

Isabella earns interest at an annual rate of 10% compounded annually on her savings account. She deposits $2,000 into her account. What is the total amount of money Isabella will have in her account after 2 years? (Use the formula to calculate compound interest: A = P(1 + r)')

Answer 1

As it indicates on the text, compound interest is represented by the following expression:

`\begin{gathered} A=P(1+r)^t \\ \text{where,} \\ A=\text{ Amount} \\ P=\text{ Principal} \\ r=\text{ interest rate in decimal form} \\ t=\text{ time} \end{gathered}`

Then, substituing the information given:

`\begin{gathered} A=2,000(1+0.1)^2 \\ A=2,420 \end{gathered}`

Isabella will have $2,420 after 2 years.