Question

You deposit $4000 each year into an account earning 3% interest compounded annually. How much will you have in the account in 25 years?

Answer 1

The formula for determining compound interest is expressed as

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

Where

A is the amount after t years

P is the principal or initial amount

t is the number of years

n is the number of compoundings in a year

r is the interest rate

From the information given,

P = 4000

r = 3% = 3/100 = 0.03

t = 25

n = 1 beacuse it is compounded once in a year

Thus, we have

A = 4000(1 + 0.03/1)^1 * 25

A = 4000(1.03)^25