You deposit $1500 in an account that pays 7% annual interest. Find the balance after 2 years when the interest is compounded daily.

Question

asked Dec 6, 2021 62.3k views

1 Answer

Replay · Answer 1 · 2021-12-11T10:02:52+0000

Answer:

$1,725.39

Explanation:

-Take 1 year =365 days.

#We calculate the effective interest rate for 7% compounded daily;

$i_m=(1+i/m)^m-1\\\\=(1+0.07/365)^(365)-1\\\\=0.072501$

#We now use this rate to calculate the compounded amount after two years:

$A=P(1+i_m)^n\\\\=1500(1.072501)^2\\\\=1725.39$

Hence, the balance after 2 years $1,725.39