Question

Riley has $955 in a savings account that earns 15% interest, compounded annually.To the nearest cent, how much interest will she earn in 2 years?

Answer 1

In order to calculate the interest generated in 2 years, we can use the formula below:

`I=P((1+r)^t-1)`

Where I is the interest generated after t years, P is the principal (initial amount) and r is the interest rate.

So, for P = 955, r = 0.15 and t = 2, we have:

`\begin{gathered} I=955((1+0.15)^2-1) \\ I=955(1.15^2-1) \\ I=955(1.3225-1) \\ I=955\cdot0.3225 \\ I=307.99 \end{gathered}`

Therefore the interest generated is $307.99.