Question

find the balance of an account with a principal balance of $4000 earring 6% interest that is compound annually after 5 years.

Answer 1

Answer : The balance of the account is $8, 245.83

Given that :

Principal (P) = $4000

Rate (r) = 6%

Period (n ) = 5 and it compounded annually

The formula for compound interest is given below

`\begin{gathered} A=P(1+(r)/(n))^{n\text{ x t}} \\ \text{Where P = principal, r= rate and n = period} \\ r\text{ = 6\%} \\ r\text{ = }(6)/(100) \\ r\text{ = 0.06} \\ A=4000(1+(0.06)/(5))^{1\text{ x 5}} \\ A=4000(1+0.012)^5 \\ A=4000x(1.012)^5 \\ A\text{ = 4000 x }1.0615 \\ A\text{ = \$}4,\text{ 245. 83} \end{gathered}`

Hence, the balance of the account is given as

Balance = A + p

Balance = $4, 245.83 + $4, 000

Balance = $8,245.83