Question

Kishany is investing in a savings account that earns 3.85% interest compounded annually. How much will Kishany have in the account at the end of the 3rd year if she deposits $600 in the account?

a
$2,310
b
$672.00
c
$558.38
d
$669.30

Answer 1

The amount in the account after 3 years is $672.00

Explanation:

Here, we want to use the compound interest formula

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

A is the amount in the account after the given time

P is the principal which is the deposit amount = $600

r is the interest rate = 3.85% = 3.85/100 = 0.0385

n is the number of times interest is compounded yearly (since it is annually, n = 1)

t is the time in years = 3

Substituting these values;

A = 600(1 + 0.0385/1)^(3 * 1)

A = 600(1.0385)^3

A = $672