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Compound Interest - Homework










































An investor deposits $500 in a savings account.

If the money is left in the savings account for ten years, how much money will be in the account at the end of the tenth year?

The interest paid by the bank is 5% annual interest, compounded annually.

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Mar 16, 2012
Compound Interest
by: Staff


Question:

A person deposited $500 in a savings account that pays 5% annual interest that is compounded yearly. At the end of 10 years, how much money will be in the savings account.


The answer:


A compound interest calculation is a geometric series because there is a constant ratio between successive terms.



Calculations:



A = P*(1 + r)^t

A = final balance in the savings account
P = principle (the initial deposit in the bank)
r = decimal form of annual interest rate
t = time in years

P = $500
r = .05 (this is the decimal form of 5%. It is = 5%÷100)
t = 10 years


A = P*(1 + r)^t

A = $500*(1 + .05)^10

A = $500*(1.05)^10

A = $500*(1.62889463)

A = $814.447313

A = $814.45 (rounded to the nearest penny)

The final answer is: A = $814.45


Thanks for writing.

Staff
www.solving-math-problems.com



Apr 17, 2013
Algebra
by: Anonymous

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