Question

Topic: "Compounding interest word problems" "Chelsea invests $4,060 in a savings account with a fixed annual interest rate of 8%, compounded 12 times per year. What will the account balance be after 7 years?"

Answer 1

Compound interest formula:

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

A is the final amount

P is the principal amount

r is the interest rate (in decimals)

n is the number of times interest is compound

t is the time in years

For the given situation:

`\begin{gathered} P=4,060 \\ r=0.08 \\ n=12 \\ t=7 \\ \\ A=4,060(1+(0.08)/(12))^(12\cdot7) \\ \\ A=4,060(1+(0.08)/(12))^(84) \\ \\ A\approx7,094.53 \end{gathered}`

Then, the balance after 7 years is $7,094.53