Question

To save for a car when he turns 18, Pascale deposited $500 each year into a savings account with a 7.5% interest rate compounded annually.

Using the formula A = P (1 + r) Superscript t, what is the value of the account at the end of the fifth year?
A.$3,071.92
B.$3,122.00
C.$3,851.77
D.$4,140.65

Answer 1

$3122.00

Explanation:

Since we have been given that

Initial amount deposited into a savings account each year = $500

Rate of interest compounded annually = 7.5%

Number of years = 5 years

So, Amount in the account at the end of the fifth year would be:

A = P( 1+r )^5} - 1

500{(1+7.5/100) - 1 }÷ ( 7.5/100)} (1+7.5/100)

500{( 1.075^5 -1/0.075} × 1.075

500( 1.4356 -1/0.075) × 1.075

500( 0.4356/0.075) × 1.075

500(5.80839)×1.075

= 3122.01

$3122.00