Question

Cheryl deposits $7,500 into the bank. She cannot withdraw or deposit any more money for 6 years. She earns a 6% interest during that time.

How much interest will she have earned at the end of 6 years?
2,700

What will her new balance be when she is finally able to withdraw her money?

Answer 1

See explanation

Explanation:

Since banks use compound interest, then we write;

A = P(1 +r)^n

A = amount

P = principal

r= rate

n= time period

P = $7,500

n = 6

r = 6%

Substituting values;

A = P(1 +r)^n

A = 7,500(1 + 6/100)^6

A=$ 10,639

Interest = Amount (A) - Principal(P)

Interest = $ 10,639 - $7,500

Interest = $3139

Her final account balance after six years is $10,639