Question

Assuming a 3% (0.03) interest rate, $200 invested today in a savings account today will be worth $206 in one year. what will that amount be in 2 and 3 years, and what is the total interest you will earn at the end of three years.

Answer 1

At the 3% interest rate, the amount in 2 years will be $212.18 and in 3 years it will be $218.54. The total interest earned at the end of 3 years will be $18.54.

Step-by-step explanation:

To calculate the amount in 2 years, we use compound interest formula A = P(1 + r)^t, where A is the future amount, P is the principal amount, r is the interest rate, and t is the time in years. Plugging in the values, we get:

A = 206(1 + 0.03)^2 = 212.18

Similarly, to calculate the amount in 3 years, we have:

A = 206(1 + 0.03)^3 = 218.54

To find the total interest earned at the end of 3 years, we subtract the principal amount from the total future amount:

Total Interest = A - P = 218.54 - 200 = 18.54