Question

Use the compound interest formula, the formula A equals P times 1 plus r over n to the n times t power . If $10,000 is invested at 2 percent daily for 5 years, what is the amount at the end of the term?

A$11,052
B $11,049
C $11,046
D $11,051

Answer 1

Option A is the correct answer.

Explanation:

Initial amount deposited into the account is $10000. This means that the principal is

P = 10000

It was compounded daily. This means that it was compounded 365 times in a year. So

n = 365

The rate at which the principal was compounded is 2%. So

r = 2/100 = 0.02

It was compounded for 5 years. So

t = 5

The formula for compound interest is

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

A = total amount in the account at the end of t years. Therefore

A = 10000 (1+0.02/365)^365×5

A = 10000 (1.000055)^1825

A = $11052