Question

Suppose in account pays 2.5% interest that is compounded annually at the beginning of each year $10,000 is deposited into the account started with $10,000 for the first year assuming no with withdrawal or other deposits are made and that the interest rate is fixed, the balance of the account after the seventh deposit is

Answer 1

To calculate the balance of the account after the seventh year with a 2.5% annual interest rate compounded annually, you can use the formula for compound interest:

A = P(1 + r/n)^(nt)

Where:

A = the future balance of the account

P = the initial principal (starting amount), which is $10,000 in this case

r = the annual interest rate (in decimal form), which is 2.5% or 0.025

n = the number of times the interest is compounded per year (annually in this case)

t = the number of years

In this scenario, you are compounding annually (n = 1), and you want to find the balance after the seventh year (t = 7). Plugging in these values:

A = 10,000(1 + 0.025/1)^(1*7)

Now, calculate the values within the parentheses:

A = 10,000(1 + 0.025)^7

A = 10,000(1.025)^7

A = 10,000(1.196842)

A ≈ $11,968.42

So, the balance of the account after the seventh deposit will be approximately $11,968.42.