Question

Suppose your​ friend's parents invest $20,000 in an account paying 6% compounded annually. What will the balance be after 6 ​years?

Answer 1

just an addtion to the reply above.

`~~~~~~ \textit{Compound Interest Earned Amount} \\\\ A=P\left(1+(r)/(n)\right)^(nt) \quad \begin{cases} A=\textit{accumulated amount}\\ P=\textit{original amount deposited}\dotfill &\$20000\\ r=rate\to 6\%\to (6)/(100)\dotfill &0.06\\ n= \begin{array}{llll} \textit{times it compounds per year}\\ \textit{annually, thus once} \end{array}\dotfill &1\\ t=years\dotfill &6 \end{cases} \\\\\\ A=20000\left(1+(0.06)/(1)\right)^(1\cdot 6)\implies A=20000(1.06)^6\implies A\approx 28370.38`

Answer 2

28,370.38

Explanation:

If accumulated but not compounded

.06 * 20,000 = 1200 per year

1200 * 6 = 7200 total interest

7200 + 20,000 = 27,200

If compounded annually

20,000 * 1.06^6 = 20,000*1.4185 = 28,370.38