Question

Using the formula in model 1, choose the correct answers for the total amount and amount of interest earned in the following compound interest problem. $5,000 at 3% for 7.0 years, compounded annually.

Total Amount = $
Interest Amount =$

Answer 1

A=5,000×(1+0.03)^(7)
A=6,149.37
Interest earned=1149.37

Answer 2

1) Total amount = $6149.35

2) Interest amount = $1149.35

Explanation:

Given : Compound interest problem- $5,000 at 3% for 7.0 years,compounded annually.

To find :

1) Total Amount = $

2) Interest Amount =$

Solution :

Using compound interest formula,

`A=P(1+r)^t`

Where A is the amount

P is the principle P=5000

r is the rate r=3%=0.03

t is the time t= 7 years

Substitute the value,

`A=P(1+r)^t`

`A=(5000)(1+0.03)^7`

`A=(5000)(1.03)^7`

`A=5000* 1.2298`

`A=6149.35`

Total amount = $6149.35

Interest amount = Total amount - Principle

Interest amount =$6149.35 - $5000

Interest amount = $1149.35