Question

Emily parents put $1,500 in her bank account for college tuition. At an interest rate of 8.25% compounded annually. What will be the total balance after 2 years?

Responses

$3,273.50
$3,273.50

$1,757.71
$1,757.71

$2,385.72
$2,385.72

$1,314.08

Answer 1

B

Explanation:

Using the formula for compound interest:

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

where:

A = final amount

P = principal (starting amount)

r = annual interest rate (as a decimal)

n = number of times interest is compounded per year

t = time (in years)

We can plug in the given values:

P = $1,500

r = 0.0825 (8.25% expressed as a decimal)

n = 1 (compounded annually)

t = 2

A = $1,500(1 + 0.0825/1)^(1*2)

A = $1,500(1.0825)^2

A = $1,757.71

Therefore, the total balance after 2 years will be $1,757.71. Answer choice B is correct.