Question

An initial deposit of $800 is put into an account that earns 5% interest, compounded annually. Each year, an additional deposit of $800 is added to the account.

Assuming no withdrawals or other deposits are made and that the interest rate is fixed, the balance of the account (rounded to the nearest dollar) after the seventh deposit is __________.

Answer 1

The balance of the account after the seventh deposit can be calculated using the formula below:

A = P (1 + r/n)ⁿ

where:

A = the balance of the account

P = The initial deposit of $800

r = the interest rate of 5%

n = the number of times the interest is compounded annually

n = 1

Therefore, the balance of the account after the seventh deposit is:

A = 800 (1 + 0.05/1)⁷

A = 800 (1.05)⁷

A = 800 (1.4176875)

A = 1128.54

Rounded to the nearest dollar, the balance of the account after the seventh deposit is $1128.