Question

Tom opens a bank account and makes an initial deposit of $15,000. The banker tells Tom that he is going to receive an annual rate of 3.5% on his investment. Find the bank balance assuming Tom leaves the account untouched for 15 years. In your final answer, include all of your calculations.

Answer 1

well if the interest is compounding  yearly at 3.5% the amount would be $25,130.23

Answer 2

His balance will be $ 25,130.232( approx )

Explanation:

Since, the future value of an amount that is increasing per period,

`A=P(1+r)^t`

Where, P is the principal amount,

r is the rate per period ( in decimal ),

t is number of periods,

Here, P = $ 15000,

r = 3.5 % = 0.035,

t = 15 years,

By substituting the values in the above formula,

The Tom's bank balance after 15 years is,

`A=15000(1+0.035)^(15)`

`=15000(1.035)^(15)`

`=15000(1.67534883075)`

`=\$25130.2324613\approx \$25130.232`