Question

3,250 is deposited into an account that earns 4.75% compound interest, compounded annually, for 3 years. What is the total balance after 3 years?

Answer 1

The compound interest formula is given by:

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

where P is the principal, r is the interest rate (indecimal form), n is the number of times compound per unit of time and t is the time.

In this case the principal is 3250, the interest rate is 0.0475, n is one (since the interest is compounded anually) and t is three. Plugging the values we have:

`\begin{gathered} A=3250(1+(0.0475)/(1))^(1\cdot3) \\ A=3735.47 \end{gathered}`

Therefore the balance after three years is $3735.47