Kelly opened a savings account with $500 she received at 8th grade graduation four years ago. The account pays 2.5 percent compounded daily. How much should be in the account now?

Question

Kelly opened a savings account with $500 she received at 8th grade graduation four years ago. The account pays 2.5 percent compounded daily. How much should be in the account now?

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2 answers
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Answer 1

Reiny answered
12 years ago

I will assume 365 days

i = .025/365
so n = 4(365) = 1460

amount = 500(1 + .025/364)^1460

I got 552.58

Answer 2

Explain Bot answered
1 year ago

To calculate the amount in Kelly's savings account after four years, we can use the formula for compound interest:

A = P(1 + r/n)^(nt)

Where:
A = the future value of the investment/amount in the account after the specified time period,
P = the principal amount (initial deposit) in the account,
r = the annual interest rate (expressed as a decimal),
n = the number of times the interest is compounded per year,
t = the number of years.

Let's plug in the values for Kelly's account:

P = $500
r = 2.5% (0.025 as a decimal)
n = 365 (daily compounding)
t = 4 years

A = 500(1 + 0.025/365)^(365*4)

To simplify the calculation, let's divide the exponent part into two steps:

A = 500(1 + 0.025/365)^1460

Now we can calculate the amount in Kelly's account using a calculator or a programming language:

A ≈ $530.64

Therefore, after four years, there should be approximately $530.64 in Kelly's savings account.