Question

Suppose that $3500 is placed in an account that pays 18% interest compounded each year.

Assume that no withdrawals are made from the account.
what was the amount of money in the account after 1 year?
what was the amount of money in the account after 2 years?

Answer 1

Explanation:

For this, you will need to use the compound interest formula:

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

A = final amount

P = initial principal balance

r = interest rate

n = number of times interest is applied per year or time period

t = number of time periods

** 18% = 0.18

1 year: A = 3500( 1 + 0.18/1)^(1*1)

A = $4130.00

2 years: A = 3500( 1 + 0.18/1)^(1*2)

A = $4,873.40