Question

Matt Li deposited $25,000 in a savings account. The account earns 5.5 percent interest compounded daily. Use the chart Amount of $1.00 at 5.5 Percent Compounded Daily' (365-Day year) on page 796 to help find the amount.

A. $25,233.45
B. $25,564.32
C. $24,765.18
D. $26,019.67

Answer 1

With daily compounding at 5.5% interest, the total amount after one year would be approximately $25,233.45 (Option A).

Step-by-step explanation:

The formula to calculate the future value of an investment with compound interest is:

Future Value = Principal x (1 + Rate/Compounding Periods)^(Compounding Periods x Time)

Where:

• A = the amount of money accumulated after n years, including interest
• P = the principal amount ($25,000 in this case)
• r = annual interest rate (5.5%)
• n = number of times that interest is compounded per year (365 for daily compounding)
• t = time the money is invested for, in years

In this case, Matt Li deposited $25,000 in a savings account with a 5.5% annual interest rate compounded daily. Using the compound interest formula, we can calculate the future value:

Future Value = $25,000 x (1 + 0.055/365)^(365 x 1)

Future Value = $25,233.45

Therefore, the amount in the savings account after one year is $25,233.45 (Option A).