Question
If you put $603 into a savings account that earns 10% compounded annually, how much interest will you receive at the end of three years?
Answers
Answered by
GPT 3.5
To calculate the interest earned on the savings account, we can use the formula for compound interest:
A = P(1 + r/n)^nt
Where:
A = the amount of money accumulated after n years, including interest
P = the principal amount (initial deposit) ($603)
r = the annual interest rate (10% or 0.10)
n = the number of times that interest is compounded per year (1 for annually)
t = the number of years the money is deposited for (3 years)
Plugging in the values:
A = 603(1 + 0.10/1)^(1*3)
A = 603(1.10)^3
A = 603 * 1.331
A = $802.20
Now, we can calculate the total interest earned by subtracting the initial deposit from the amount accumulated:
Interest = $802.20 - $603
Interest = $199.20
Therefore, you will receive $199.20 in interest at the end of three years.
A = P(1 + r/n)^nt
Where:
A = the amount of money accumulated after n years, including interest
P = the principal amount (initial deposit) ($603)
r = the annual interest rate (10% or 0.10)
n = the number of times that interest is compounded per year (1 for annually)
t = the number of years the money is deposited for (3 years)
Plugging in the values:
A = 603(1 + 0.10/1)^(1*3)
A = 603(1.10)^3
A = 603 * 1.331
A = $802.20
Now, we can calculate the total interest earned by subtracting the initial deposit from the amount accumulated:
Interest = $802.20 - $603
Interest = $199.20
Therefore, you will receive $199.20 in interest at the end of three years.