Question

How much would Vincent have in his account after three years if he started with $100 and earns 5 percent, compounding annually?

Answer 1

`100(1+5/100)^3=115.76`

Answer 2

The amount Vincent have in his account after three years when his amount is compounded annually is:

$ 115.7625

Explanation:

The amount in the account i.e. the principal amount is:

P=$ 100.

Rate of interest is: 5%.

i.e. r=5%=0.05

( Since, 5%=5/100=0.05)

The time period for which the interest is calculated i.e. t=3 years.

Hence, the future value of the investment or loan including interest i.e. A is given by:

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

where n is the number of times the interest is compounded per year.

Here we have n=1.

Hence, the value of A is:

`A=100(1+0.05)^3\\\\A=100(1.05)^3\\\\A=\$\ 115.7625`

Hence, the amount Vincent have in his account after three years is:

$ 115.7625