The formula to calculate compound interest is A = P(1 + r/n)^(nt), where:
A is the future value of the investment/loan, including interest
P is the principal investment amount (the initial deposit)
r is the annual interest rate (as a decimal)
n is the number of times that interest is compounded per year
t is the number of years the money is invested/borrowed for
In this case, P = $2,000, r = 0.03 (3% expressed as a decimal), n = 1 (compounded annually), and t = 2 (two years).
A = 2000(1 + 0.03/1)^(1*2)
A = 2000(1 + 0.03)^2
A = 2000(1.03)^2
A = 2000(1.0609)
A ≈ 2121.80
Therefore, Liam will have approximately $2,121.80 after two years. The correct option is D.
Liam puts $2,000 in the bank with a 3% annual interest rate compounded annually. If Liam does
not touch his money, how much money will he have after two years?
$2,000.06
x
$2,060.00
$2,120.00
D
$2,121.80
1 answer