Question

You deposit $300 in an account that pays 1.48% annual interest. What is the balance after 1 year if the interest is compound daily?

Answer 1

We are going to use the compound interest formula to solve:

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

Where:

P = initial balance

r = interest rate

n = number of times compounded annually

t = time

1.48% to a decimal

`(1.48)/(100)=0.0148`

Since the interest is compounded daily, we will use 365 for n. Therefore:

`A=300(1+(0.0148)/(365))^(365(1))=300(1+(0.0148)/(365))^(365)=304.47`

Answer: $304.47