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3. Sancho deposits $500 in a bank account today which pays 4 percent interest, compounded annually. The amount of interest Sancho earns in year 4 will be:

User UnDiUdin
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1 Answer

3 votes

Answer:

$84.93

Step-by-step explanation:

Future value in year 4 =

PV x ( 1 + r)^n

PV = present value = $500

r = 4%

n = 4

$500(1.04)^4 = $584.93

Interest rate = future value - amount invested = $584.93 - $500 = $84.93

User Nandakumar Edamana
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