Question

Sami opens an account with a principal balance of $3,200. The

account earns 4.75% interest compounded annually. No additional
money is deposited or withdrawn from the account. Sami checks the
balance of the account at the end of 5 years. What is the amount of
interest earned at the end of 5 years?

Answer 1

$835.71

Explanation:

To solve this problem, we will 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, lets change 4.75% into a decimal:

4.75% ->
`(4.75)/(100)` -> 0.0475

Now, plug the values into the equation:

`A=3,200(1+(0.0475)/(1))^(1(5))`

`A=4,035.71`

Lastly, subtract A from the principal:

`4,035.71 - 3,200 = 835.71`

The interest earned is $835.71