Question

Emma has $70 in a savings account. The interest rate is 5%, compounded annually.To the nearest cent, how much will she have in 2 years?

Answer 1

Using compound interest formula:

`A=P(1+(r)/(n))^(nt)`

Where:

A = Amount

P = Principal = $70

r = Interest rate = 5% = 0.05

n = Number of times interest is compounded per year = 1

t = time = 2

So.

`\begin{gathered} A=70(1+0.05)^2 \\ A=70(1.05)^2 \\ A=77.175 \\ A\approx77.18 \end{gathered}`

Answer:

$77.18