Question

You invest $2,000 in an account that is compounded annually at an interest rate of 5%. You never withdraw money from the account. Which equation below gives the amount of money you will have in the account after t years?

A(t) = 2,000e5t
A(t) = 2,000e0.05t
A(t) = 2,000(1.5)t
A(t) = 2,000(1.05)t

Answer 1

Answer: D: A(t)= 2,000 (1.05) ^t

Answer 2

The formula is: A ( t ) = I * ( 1 + r )^t. In this case: I = $2,000, r = 0.05 ( or%5) and t is the number of years. A ( t ) = 2,000 * ( 1 + 0.05 ) ^t ; A ( t ) = 2,000 * ( 1.05 )^t. For example: after 1 year: A ( 1 ) = 2,000 * ( 1.05 )^1 = $2,100 and after 2 years: A ( 2 ) = 2,000 * ( 1.05 )^2 = $2,205, and so on. Answer: D ) A ( t ) = 2,000 * ( 1.05 )^t