Question

You invest $1300 in an account that pays 6% compounded annually. What is the balance after two years?

Answer 1

The compounded interest formula is :

$A=P(1+\frac{r}{n})^{nt}$

where A = future amount

P = Present amount

r = interest rate

n = number of compounding

t = time in years

From the problem,

P = $1300

r = 6% or 0.06

n = 1 (compounded annually)

t = 2 years

Using the formula above,

$\begin{gathered} A=1300(1+\frac{0.06}{1})^{1(2)} \\ A=1460.68 \end{gathered}$

The answer is $1460.68