Question

A customer opens a savings accountthat applies 3% compound interestannually. If the initial investment is$250.00, how much money will be in the account at the end of two years?A. $265.00B. $265.23C. $256.00D. $400.00

Answer 1

Answer:

$265.23

Option B is correct

Step-by-step explanation:

The compound interest, r = 3%

r = 3/100

r = 0.03

The interest is compounded annually

Number of times the interest is compounded annually, n = 1

The initial investment, P = $250.00

Time, t = 2 years

The amount in the account after 2 years is calculated below

`\begin{gathered} A=P(1+(r)/(n))^(nt) \\ A=250(1+(0.03)/(1))^(1)2)) \\ A=250(1.03)^2 \\ A=250(1.0609) \\ A=265.225 \\ A=265.23 \end{gathered}`

The amount that will be in the account at the end of two years is $265.23