Question

Bryce has $3,106 in a savings account that earns 4% interest, compounded annually.To the nearest cent, how much interest will he earn in 5 years?

Answer 1

Given:

Bryce has $3,106 in a savings account that earns 4% interest, compounded annually.

so, the initial investment = P = 3,106

The interest rate = r = 4% = 0.04

compounded annually ⇒ n = 1

We will find the interest earned in 5 years, ⇒ t = 5

We will use the following formula to find the interest (I):

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

substitute with the given data:

`\begin{gathered} I=3106\cdot(1+(0.04)/(1))^(1\cdot5)-3106 \\ I=3106\cdot1.04^5-3106=3106\cdot(1.04^5-1)\approx672.9239 \end{gathered}`

Rounding to the nearest cent

So, the answer will be the interest = $672.92