The formula to calculate compound interest is:
A = P(1 + r/n)^(nt)
where A represents the final amount in the account, P is the principal amount (initial deposit), r is the annual interest rate (as a decimal), n is the number of times interest is compounded per year, and t is the number of years.
In this case, Liam puts $2,000 in the bank, the interest rate is 3% or 0.03 as a decimal, interest is compounded annually (n = 1), and he plans to keep the money in the account for two years (t = 2).
Plugging these values into the formula:
A = 2000(1 + 0.03/1)^(1*2)
A = 2000(1 + 0.03)^2
A = 2000(1.03)^2
A = 2000(1.0609)
A ≈ $2,121.80
Therefore, Liam will have approximately $2,121.80 after two years. The correct option is d) $2,121.80.
Liam puts $2,000 in the bank with a 3% annual interest rate compounded annually. If Liam does not touch his money, how much money will he have after two years?
a $2,000.06
b $2,060.00
c $2,120.00
d $2,121.80
1 answer