Question

Katie has $7 in a savings account. The interest rate is 5%, compounded annually.

To the nearest cent, how much interest will she earn in 3 years?

Answer 1

15%

Explanation:

I am not sure

Answer 2

Compound interest earned would be $1.1034

Explanation:

The formula for amount, when interest is compounded annually is

A = P(1+r)^n

Here

A= amount

P= principal

r= rate of interest

n= time period

So putting the values in the formula

A = 7(1+.05)^3

A = 7*(1.05)^3

A = 7*1.157625

A= 8.1034

So the Compound Interest would be

C.I = 8.1034-7.0

C.I = 1.1034