Question

Kenneth opened a savings account and deposited $300.00 as principal. The account earns

14% interest, compounded annually. What is the balance after 8 years?

Use the formula A = P1+
P(1 + r/n)", where A is the balance (final amount), P is the principal
(starting amount), r is the interest rate expressed as a decimal, n is the number of times per
year that the interest is compounded, and t is the time in years.
Round your answer to the nearest cent.

Answer 1

$855.78

Explanation:

Interest, in this context, is the amount of money a saving account can earn over time.

Compound Interest Formula

There are 2 types of interest: simple and compound. For this question, we are going to use the compound interest formula. This formula is
`A = P(1+(r)/(n))^(nt)`. As stated in the question, A is the total balance, P is the principal, r is the interest rate, n is how often the interest is compounded, and t is time.

Variables

The values of these variables for this question are as follows:

• P = 300.00

The principal is the initial amount, and the question states that the account starts at 300 dollars.

• r = 0.14

The question says the interest rate is 14%, so we can convert this to the decimal 0.14.

• n = 1

If something is compounded annually, it is compounded once a year, so n must be 1.

• t = 8

If we want to find the balance after 8 years, we should set t equal to 8.

Solving for A

To find A, all we have to do is plug the variables into the formula.

• 
  `A = 300(1+(0.14)/(1))^(1*8)`

This can be rewritten as:

• 
  `A=300(1.14)^8`

Solve this to find that A ≈ 855.78. After 8 years, the balance will be $855.78.