Question

Suppose I invest $400 in an account that pays 3% interest annually. How much will I have in the Account after 2 years, assuming that I make no other deposits or withdrawals?

A) A = 400(1+.3)^2

B) A = 400(1 + .3)^24

C) A = 400 (1 + .03)^2

D) A = 400 (1 + .03)^24

Answer 1

To calculate the amount in the account after 2 years with an annual interest rate of 3%, you would use the formula for compound interest:

\[ A = P(1 + r)^t \]

where:
- \( A \) is the amount in the account after t years,
- \( P \) is the principal amount (the initial investment),
- \( r \) is the annual interest rate (as a decimal),
- \( t \) is the number of years the money is invested for.

For your case:
- \( P = 400 \)
- \( r = 0.03 \) (which is 3% as a decimal)
- \( t = 2 \)

Plugging these values into the formula gives:

\[ A = 400(1 + 0.03)^2 \]

So the correct answer is:

**C) A = 400(1 + .03)^2**