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Suppose $5,000 is deposited into an account paying 7.5% interest, compounded annually. How much money is in the account after four years if no withdrawals or additional deposits are made?

User Yolanda
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1 Answer

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Final answer:

The amount of money in the account after four years with no withdrawals or additional deposits is $6,801.92.

Step-by-step explanation:

To calculate the amount of money in the account after four years, we can use the formula for compound interest: A = P(1 + r/n)^(nt), where A is the final amount, P is the principal amount (initial deposit), r is the interest rate, n is the number of times interest is compounded per year, and t is the time in years.

In this case, the principal amount is $5,000, the interest rate is 7.5%, interest is compounded annually (n = 1), and the time is 4 years (t = 4).

Substituting these values into the formula, we get

A = 5000(1 + 0.075/1)^(1*4)

= 5000(1 + 0.075)^4

= $6,801.92.

Therefore, the amount of money in the account after four years with no withdrawals or additional deposits is $6,801.92.

User Hollyann
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