Question

John placed $2,000 in a savings account which compounds interest annually at a rate of 4.3%. How much will he have in the account after 3 years?

Round your answer to the nearest dollar.
Do NOT round until you have calculated the final answer.

Answer 1

Amount of money in the account: $2,269.25

Interest: $269.25

Explanation:

John starts out with $2000 in savings.

(I can't be bothered to find the formula for annual compound interest, so we'll do it manually based on yearly calculations.)

Because it is calculated annually, we must do yearly calculations.

Year One:

2,000 x 1.043 = 2,086.00

After the first year, at 4.3% John's $2000 Savings account would mature into $2,086.00. (earning him $86.00 interest for the year)

Year Two:

2,086.00 x 1.043 = 2,175.70

After, the second year at 4.3%, $2,086.00 becomes $2,175.70. (making his interest $175.70 total, and $89.70 for the year.)

Year Three:

2,175.70 x 1.043 = 2,269.25

After the third, and final year, at 4.3%, $2,175.70 becomes $2,269.25. (making the interest $269.25 or $93.56 for the year.)

Answer 2

The amount of money he has in the account after 3 years:

A = Money x (1 + rate)^year

= 2000 x (1 + 4.3/100)^3

=2269.3 dollar

Hope this helps!

:)