Question

John deposited $80 in a savings account earning 5% interest, compounded annually. To the nearest whole dollar, how much interest will he earn in 3 years?

Answer 1

Answer:

The interest is equal to $\ 13$

Step-by-step explanation:

we know that    

The compound interest formula is equal to  

$A=P(1+\frac{r}{n})^{nt}$  

where  

A is the Final Investment Value  

P is the Principal amount of money to be invested  

r is the rate of interest  in decimal

t is Number of Time Periods  

n is the number of times interest is compounded per year

in this problem we have  

$t=3\ years\\ P=\ 80\\ r=0.05\\n=1$  

substitute in the formula above  

$A=\ 80(1+\frac{0.05}{1})^{3}=\ 92.61$  

Find the interest

$I=A-P=\ 92.61-\ 80=\ 12.61$

Round to the nearest whole dollar

$\ 12.61=\ 13$