The equation that models this situation is:
A = P(1 + r/n)^(nt)
Where:
A = the future value of the investment
P = the principal amount (initial deposit)
r = the annual interest rate (in decimal form)
n = the number of times interest is compounded per year
t = the number of years
In this case, we have:
P = $5,000
r = 3.75% = 0.0375
n = 1 (compounded annually)
t = the number of years (unknown)
So the equation becomes:
A = 5000(1 + 0.0375/1)^(1t)
Mr.Bert deposited $5,000 into an investment account with an annual interest rate of 3.75%. What equation models this situation?
1 answer
1 answer