Question

A $3,200.00 principal earns 7% interest, compounded annually. After 3 years, what is the balance in the account? Round to the nearest cent.

A. $1,097,600.00
B. $7,840.28
C. $67,200.00
D. $3,920.14

Answer 1

The balance in the account is $3,920.14

Compound interest

The formula for calculating the compound interest is expressed as

A = P(1 + r)^t

Given

• P = $3,200.00
• r = 7% = 0.07
• t = 3 years

Substitute

A = 3200(1+0.07)^3

A = 3,920.14

Hence the balance in the account is $3,920.14

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