Question

Vivian opened a savings account and deposited $5,000.00 as principal. The account earns 15% interest, compounded annually. What is the balance after 4 years?
Use the formula A=P1+
r
n
nt, where A is the balance (final amount), P is the principal (starting amount), r is the interest rate expressed as a decimal, n is the number of times per year that the interest is compounded, and t is the time in years.
Round your answer to the nearest cent.

Answer 1

Here n = 1 (compounded annually), so A = P(1 + r)^t.

A = 5000(1 + 0.15)^4 = 5000(1.15)^4 = 5000(1.74900625) = 8745.03125

Rounded to the nearest cent: $8,745.03