Question

Irma opened a servings account and deposited $1,000.00 as principal. the account earns 3% interest, compounded annually. what is the balance after 4 years?

Answer 1

Step 1: Problem

Compound interest

Step 2: Concept

`\begin{gathered} A=P(1+r)^t \\ A\text{ = amount or balance or future value} \\ P\text{ = principal} \\ r\text{ = rate} \\ t\text{ = time} \end{gathered}`

Step 3: Method

A = ?

r = 3% = 3/100 = 0.03

t = 4 years

P = $ 1,000

`\begin{gathered} A=P(1+r)^t \\ A=1000(1+0.03)^4 \\ A\text{ = 1000 }*1.03^4 \\ A\text{ = 1000 X 1.1255} \\ A\text{ = \$1125.5} \end{gathered}`