Question

An initial amount of $600 is invested in a compound

savings account with an annual interest rate of 3.5%.

What is the total amount after 2 years

What is the total amount after 4 years

Answer 1

2 years = $642.74 | 4 years = $688.51

Explanation:

To solve this problem, we can use the compound interest formula:

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

P = initial balance

r = interest rate (decimal)

n = number of times compounded annually

t = time

First, change 3.5% into a decimal:

3.5% ->
`(3.5)/(100)` -> 0.035

Now, lets solve for 2 years:

`A=600(1+(0.035)/(1))^(1(2))`

`A=642.74`

The last step is to solve for 4 years:

`A=600(1+(0.035)/(1))^(1(4))`

`A=688.51`

After 2 years, the total amount will be $642.74. After 4 years it will be $688.51