Question

Tommy deposited $2,000 into a savings account that earns 5% interest per year. What

equation would be used to determine how much money Tommy has after x number of years?

Answer 1

7A, 8D

Explanation:

The compound interest formula is as followed

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

A = accumulated amount

P = principle

r = interest rate

n = compounding

t = time

The accumulated amount is represented by f(x).

The principle is the amount of money you start with. In this case Tommy starts with 2000 dollars. P = 2000

The interest rate is 5%. This needs to be converted into a decimal.

5% = 0.05 = r

The money is compounded annually, thus n = 1.

The time is represented by x. x = t.

thus

`f(x) = 2000(1+0.05)^(x)`

After six years, you simply find f(6), or substitute 6 into x.

f(6) = 2000(1.05)^6 = $2,680.19