Question

A savings account pays 2% interest compounded annually. If $1,200 is deposited initially and again at the first of each year, how much money will be in the account three years after the initial deposit?

A) $2,472.48
B) $3,672.48
C) $3,745.93

Answer 1

The answer is $3745.93

Did my work and thast what I came out to be, I looked at the other answer to figure how to work it. P.S I got it right on edgenunity

Answer 2

Amount in compound interest = p(1 + r/t)^nt where p is the initial deposit, r = rate, t = number of compunding in a period and n = period.

Here, first deposit of $1,200 amounted to 1,200(1 + 2/100)^3 = 1,200(1 + 0.02)^3 = 1,200(1.02)^3 = 1,200(1.061208) = $1,273.45
second deposit of $1,200 amounted to 1,200(1 + 2/100)^2 = 1,200(1 + 0.02)^2 = 1,200(1.02)^2 = 1,200(1.0404) = $1,248.48
third deposit of $1,200 amounted to 1,200(1 + 2/100)^1 = 1,200(1 + 0.02) = 1,200(1.02) = $1,224.00

Total Balance at the account after three years = $1,273.45 + $1,248.48 + $1,224.00 =$3,745.93