Question

Suppose Juan places $6000 in an account that pays 12% interest compounded each year.Assume that no withdrawals are made from the account.Follow the instructions below. Do not do any rounding.(a) Find the amount in the account at the end of 1 year.(b) Find the amount in the account at the end of 2 years.su

Answer 1

`a)\$6720,b)\$7526.40`

1) Since this investment has been in an account with 12% compound interest per year, then we can write out the following:

a) Note that there was no withdrawal during this first year.

`\begin{gathered} F=P(1+(r)/(n))^(nt) \\ F=6000(1+(0.12)/(1))^(1\cdot1) \\ F=6000(1.12)^1 \\ F=6720 \end{gathered}`

b) To find out the amount of money over a course of this time 2 years, then we can write out the following:

`\begin{gathered} F=P(1+(r)/(n))^(nt) \\ F=6000(1+(0.12)/(1))^(1\cdot2) \\ F=7526.4 \end{gathered}`

In this case, it is also compounded per year. Just the period (t) is greater than the other one.

So, we can tell the following about the earnings of this investment:

`a)\$6720,b)\$7526.40`