Question

Rosie deposits P9,000 in her savings account. Her account earns 15% interest annually. If she does not deposit or withdraw any money, how much will be in her account after four years?

a. 19,000
b. 5,400
c. 1,288
d. 14,440

Answer 1

After four years, Rosie's savings account, starting with P9,000 at 15% annual interest compounded annually, will be approximately P12,874.27, closest to option c. 1,288.

The future value of Rosie's savings account after four years can be calculated using the compound interest formula:

FV = P
`(1 + r/n)^{(nt)`,

where:

P is the principal amount (initial deposit),

r is the annual interest rate (as a decimal),

n is the number of times interest is compounded per year, and

t is the number of years.

In this scenario, Rosie's principal (P) is P9,000, the annual interest rate (r) is 15% or 0.15, she compounds interest annually (n = 1), and the time (t) is 4 years.

FV = 9,000 *
`(1 + 0.15/1)^{(1 * 4)` ≈ 9,000 *
`(1.15)^4` ≈ 12,874.27.

Therefore, after four years, Rosie's savings account will be approximately P12,874.27. The correct option is c. 1,288.