Question

Suppose that $7000 is placed in an account that pays 19% interest compounded each year.Assume that no withdrawals are made from the account.Follow the instructions below. Do not do any rounding.Find the amount in the account at the end of 1 year.Find the amount in the account at the end of 2 years.

Answer 1

• At the end of the first year, we will have $8,330.

,

• At the end of the second year, we will have $9912.7.

Step-by-step explanation

Given

• $7000 is placed

,

• Pays 19% interest compounded each year.

Procedure

If we place $7000, we could consider that this is our 100% (1). Thus, at the end of the first year, we will have 119% (1.19). Making a relation that represents the latter we can find the total amount at the end of 1 year:

`(x)/(1.19)=(7000)/(1)`
`x=7000\cdot1.19=8330`

Now, considering that $8330 is our 100% (1) and the amount in the account at the end of 2 years is 119% (1.19), then, following the same procedure:

`(x)/(1.19)=(8330)/(1)`
`x=8330\cdot1.19=9912.7`