Question

A principle of $2000 is placed ina saving account at 3% APR compounded annually. How much is in the account after one year, two years and three years?

1 year: $

2 years: $

3 years: $​

Answer 1

1 year: $2060

2 years: $2121.80

3 years: $2185.45

Explanation:

Compound interest formula is A = P(1 +
`(r)/(n)^{nt`) where A is the final amount, P is the initial principal balance, r is the interest rate, n is the number of times interest applied per time period, and t is the number of time periods elapsed. In our case, P would be equal to 2000 dollars, r would be equal to 0.03, for 3 percent, and our n value would just be one, so the final equation is:

`2000(1.03)^t`

First, let's evaluate t for 1, as in one year.

`2000 * 1.03^1` = 2000 x 1.03 = 2060

Two years: 2000 * 1.03 squared = 2121.80

Three years: 2000 * 1.03^3 = 2185.45!

Hope this helps!