Find the value after five years of a $3,000 savings account that pays 3% interest compounded yearly. Round the answer to two decimal places.

Question

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Answer 1

To find the value after five years of a savings account with 3% interest compounded annually, we can use the formula for compound interest:

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

Where:
A = the future value of the investment/loan, including interest
P = the principal investment amount (initial deposit or loan amount)
r = annual interest rate (in decimal form)
n = number of times that interest is compounded per year
t = number of years

In this case, the principal investment amount (P) is $3,000, the annual interest rate (r) is 3% (or 0.03 as a decimal), the interest is compounded yearly (n = 1), and the number of years (t) is 5.

Plugging in these values into the formula, we get:

A = $3,000(1 + 0.03/1)^(1*5)
A = $3,000(1 + 0.03)^5
A = $3,000(1.03)^5
A ≈ $3,464.10

Rounding this to two decimal places, the value after five years of a $3,000 savings account that pays 3% interest compounded yearly is $3,464.10.