Question

You deposit $300 in an account that pays 1.48% annual interest. What is the balance after 1 year if the interest is compound daily?

Answer 1

We are going to use the compound interest formula to solve:

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

Where:

P = initial balance

r = interest rate

n = number of times compounded annually

t = time

1.48% to a decimal

$\frac{1.48}{100}=0.0148$

Since the interest is compounded daily, we will use 365 for n. Therefore:

$A=300(1+\frac{0.0148}{365})^{365(1)}=300(1+\frac{0.0148}{365})^{365}=304.47$

Answer: $304.47