Question

Burt's grandparents started a savings account for him when he was born. They invested

$1250 in an account that pays 7.5% interest every year. How much money is in the
account on Burt's 18th birthday?

Answer 1

4594.76 USD will be in the account on Burt's 18th birthday.

Explanation:

Since interest rate is constant in time, we can use the definition of composite interest to determine how much money will be on Burt's 18th birthday, that is:

`C = C_(o)\cdot \left(1+(r)/(100) \right)^(t)` (1)

Where:

`C_(o)` - Initial amount, measured in US dollars.

`C` - Current amount, measured in US dollars.

`r` - Annual interest rate, measured in percentage.

`t` - Time, measured in years.

If we know that
`C_(o) = 1250\,USD`,
`r = 7.5` and
`t = 18`, then the money in the savings account on Burt's 18th birthday is:

`C = (1250\,USD)\cdot \left(1+(7.5)/(100) \right)^(18)`

`C = 4594.76\,USD`

4594.76 USD will be in the account on Burt's 18th birthday.