Question

Ava deposited $3,500 in an account that earned 4.375% interest

compounded annually. Ava did not withdraw any money from this account
and she did not make any deposits to this account.
How much interest will Ava's account have earned after 5 years?

Answer 1

4335.61

Explanation:

Using the equation A = P (1 + r/n)^nt

lets fill in the variables,

P (principal) is 3500.00

r (rate) is .04375 - we do this in decimal form

n (number of times interest is doubled) here it is annually, could be monthly or daily too, but we are told annually, so we use 1

t (time) is 5 years

So: 3500(1+.04375/1) ^ 1(5)

pemdas

parenthesis first 1 +.04375/1 = 1.04375

exponents next 1 x 5 = 5

so now we have 3500 (1.04375) ^5

take 1.04375 to the power of 5 (pemdas) then multiplication

= 3500(1.2387465058) or

A = 4335.61

This is the same result as calculating simple interest for 5 years but each year calculating off the new Principal amount that includes interest.

3500 x .04375 = 153.125 or 3653.125 *(year one)

159.82 = 3812.95

166.82 = 3979.77

174.11 = 4153.88

181.73 = 4335.61