The formula to calculate the future value of an account with compound interest is:
\[ A = P \left(1 + \dfrac{r}{n}\right)^{nt} \]
Where:
A = Future value
P = Principal amount (initial amount)
r = Annual interest rate (as a decimal)
n = Number of times that interest is compounded per year
t = Number of years
Given:
P = $3000
r = 3% (as a decimal, so 0.03)
n = 1 (interest is compounded yearly)
t = 5 years
Using the formula:
\[ A = 3000 \left(1 + \dfrac{0.03}{1}\right)^{1 \cdot 5} \]
Simplifying:
\[ A = 3000 \left(1 + 0.03\right)^5 \]
Calculating:
\[ A = 3000 \times (1.03)^5 \approx 3000 \times 1.159274 \approx 3477.82 \]
After five years, the value of the $3000 savings account will be approximately $3477.82.
Find the value after five years of a $3000 savings account that pays 3% interest, compounded, yearly round the answer to the two decimal places
1 answer
1 answer