Question

Don put $4,000 in a savings account with an interest rate of 4% for three years. If the interest is compounded annually, how much money will he have at the end of the three years?

Answer 1

$4,499.46

Explanation:

We can use the compound interest formula for this problem:

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

P = initial balance

r = interest rate (decimal)

n = number of times compounded annually

t = time

First, lets change 4% into a decimal:

4% ->
`(4)/(100)` -> 0.04

Now lets plug the values into the equation as shown below:

`A=4,000(1+(0.04)/(1))^(1(3))`

`A=4,499.46`

Don will have $4,499.46 at the end of the three years.