Question

Debbie has $4,000 in an account. The interest rate is 15% compounded annually.
To the nearest cent, how much interest will she earn in 2 years?
Use the formula B=p(1+r)t, where B is the balance (final amount), p is the principal (starting amount), r is the interest rate expressed as a decimal, and t is the time in years.

Answer 1

B = 4000(1 + 0.15)^2 = 4000(1.15)^2 = 4000(1.3225) = 5290.00.

Interest earned = 5290.00 − 4000.00 = $1,290.00.