Question

Calculate the future value (in dollars) of $1,550 deposited into an account earning an annual simple interest rate of 4% compounded daily after 3 years. Round to the nearest cent. (Use 365 for the number of days in a year. Enter a number.)

Answer 1

Answer: the future value is $1748.4

Explanation:

We would apply the formula for determining compound interest which is expressed as

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

Where

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

r represents the interest rate.

n represents the periodic interval at which it was compounded.

P represents the principal or initial amount deposited

From the information given,

P = 1550

r = 4% = 4/100 = 0.04

n = 365 because it was compounded 365 times in a year.

t = 3 years

Therefore,.

A = 1550(1 + 0.04/365)^365 × 3

A = 1550(1+0.00011)^1095

A = 1550(1.00011)^1095

A = 1550 × 1.128

A = 1748.4