Question

Katy has $40 in a savings account. The interest rate is 5%, compounded annually.To the nearest cent, how much interest will she earn in 3 years?What’s the answer

Answer 1

Given:

Katy has $40 in a savings account.

So, the principal = P = 40

The interest rate = r = 5% = 0.05

compounded annually, n = 1

Time = t = 3 years

So, Amount of money after 3 years = A

`\begin{gathered} A=P\cdot(1+(r)/(n))^(nt) \\ A=40\cdot(1+(0.05)/(1))^3=46.305 \end{gathered}`

So, the interest = A - P =

`46.305-40=6.305`

Rounding to the nearest cent

So, the answer will be:

interest she will earn in 3 years = $6.3