Question

You invest 5000 dollars in an account at 1.6% interest is compounded annually (once a year) a) write an equation that shows the amount of money you have after x years b) How much money would you have after 15 years

Answer 1

a. P= 5000( 1.016)^x

b. $ 6344.18

Explanation:

The equation for finding the compound interest annually is

P = P_1 ( 1 +r)^t

Here

P = the amount after the interest has been added or the new balance

P_1= the principal amount

r= rate at which interest is charged

t= time in years

So we have

P = the new balance

P_1= the principal amount= $ 5000

r= rate at which interest is charged= 1.6 %

t= time in years= x

Putting the values in the above equation

P = P_1 ( 1 +r)^t

P = 5000 ( 1+ 1.6/100) ^x

P= 5000( 1.016)^x

b) When t= 15

Again

Putting the values in the above equation

P = P_1 ( 1 +r)^t

P = 5000 ( 1+ 1.6/100)^15

P = 5000( 1.26883637) = 6344.18185= $ 6344.18