Question

Initial Knowledge Check

Question 2
Suppose that $4000 is placed in an account that pays 11% interest compounded each year.
Assume that no withdrawals are made from the account.
Follow the instructions below. Do not do any rounding.
(a) Find the amount in the account at the end of 1 year
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(b) Find the amount in the account at the end of 2 years.
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Answer 1

Explanation:

We first need to figure out what the equation is for this set of circumstances before we can answer any questions. We will use the equation

`A(t)=P(1+r)^t` which is just another form of an exponential equation where

(1 + r) is the growth rate, P is the initial investment, and t is the time in years. We will fill in the values we know first to create the equation:

`A(t)=4000(1+.11)^t` which simplifies to

`A(t)=4000(1.11)^t`

Now we'll just sub in a 1 for t and solve, then a 2 for t and solve.

When t = 1:

A(t) = 4000(1.11) so

A(t) = 4440

When t = 2:

`A(t)=4000(1.11)^2` which simplifies to

A(t) = 4000(1.2321) so

A(t) = 4928.40