Question

At the beginning of year 1, Josie invests $400 at an annual compound interest

rate of 5%. She makes no deposits to or withdrawals from the account.
Which explicit formula can be used to find the account's balance at the
beginning of year 3?

Answer 1

The balance in Josie's account at the beginning of year 3, with a $400 investment at 5% annual compound interest, can be calculated using the compound interest formula A = P(1 + r)^n, which results in $441.

Step-by-step explanation:

The explicit formula to find the account's balance at the beginning of year 3 for Josie's investment with an annual compound interest rate can be determined using the compound interest formula:

A = P(1 + r)^n

Where:

• A is the amount of money accumulated after n years, including interest.
• P is the principal amount (the initial amount of money).
• r is the annual interest rate (decimal).
• n is the number of years the money is invested.

In Josie's case, she invested $400 at a 5% annual interest rate for 2 years. The formula will look like this:

A = 400(1 + 0.05)^2

Now, calculate the amount:

A = 400(1 + 0.05)^2

A = 400(1.05)^2

A = 400(1.1025)

A = $441

Hence, the balance in Josie's account at the beginning of year 3 would be $441.