Question

Morgan wants to save to buy a car and decides to open a banking account that is offering an interest rate of 4.5% compounded annually. How much will Morgan have in the account after 5 years if $7,000 is deposited today?

Answer 1

He'll have approximately $8723.3 on his account in five years.

Explanation:

Since the amount invested is compounded yearly, we can calculate the amount he'll have in 5 years by using the following expression:

`M = C*(1 + r)^t`

Where M is the final amount, C is the invested money, r is the interest rate and t is the time elapsed in years. Applying the data from the problem we have:

`M = 7000*(1 + (4.5)/(100))^5\\M = 7000*(1 + 0.045)^5\\M = 7000*(1.045)^5\\M = 8723.274\\`

He'll have approximately $8723.3 on his account in five years.