Question

Sarah deposited $1,800 into a savings account that earns 4% compound interest (her money is compounded annually for 7 years), what is the ending balance in her account?

Please show your work with a step-to-step guide below:

Answer 1

$2368.68

Explanation:

Use the equation for total amount involving compound interest:

`A = P(1 + (r)/(n) )^(t*n)`

A is the total amount.

P is the principle, the starting investment.

r is the compound interest rate annually.

n is number of compounding periods in a year.

t is the number of years.

Substitute the values known into the equation.

`A = 1800(1 + (0.04)/(1) )^(7*1)`

Simplify.

`A = 1800(1 + 0.04)^(7)`

`A = 1800(1 .04)^(7)`

Solve.

A = 2368.68 <= rounded to 2 decimal places

The ending balance in her account is $2368.68.