Final answer:
To find the balance after five years on a $1000 deposit with 7.2% interest compounded annually, use the formula A = P(1 + r/n)^(nt). The final balance would be $1419.
Step-by-step explanation:
When you deposit $1000 in a college fund that pays 7.2% interest compounded annually, to find the account balance after five years, you can use the formula for compound interest:
A = P(1 + r/n)nt
Where:
- A is the amount of money accumulated after n years, including interest.
- P is the principal amount (the initial amount of money).
- r is the annual interest rate (decimal).
- n is the number of times that interest is compounded per year.
- t is the time the money is invested for, in years.
Plugging in the given values:
- P = $1000
- r = 7.2% = 0.072
- n = 1 (since it's compounded annually)
- t = 5 years
The equation becomes:
A = $1000(1 + 0.072/1)1*5
A = $1000(1 + 0.072)5
A = $1000(1.072)5
A = $1000 * 1.419
A = $1419
Therefore, the account balance after five years would be $1419.