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

b: $672

Explanation:

The appropriate formula for use here is the Compound Amount formula:

A = P(1 + r)^n, where r is the annual interest rate as a decimal fraction, P is the principal (up front amount invested), and t is time measured in years.

Here we have A = ($600)(1 + 0.0385)^3, or:

A = ($600)(1.0385)^3

A = $672 (matches answer b)