Question

Cindy has a savings account with National Bank. She earns 4% interest compounded yearly on $1,250.00. What amount will she receive in interest in three years?

Answer 1

`I=\$156.08`

Explanation:

we know that

The compound interest formula is equal to

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

where

A is the Final Investment Value

P is the Principal amount of money to be invested

r is the rate of interest in decimal

t is Number of Time Periods

n is the number of times interest is compounded per year

in this problem we have

`t=3\ years\\ P=\$1,250.00\\ r=4\%=4/100=0.04\\n=1`

substitute in the formula above

`A=1,250.00(1+(0.04)/(1))^(1*3)`

`A=1,250.00(1.04)^(3)`

`A=\$1,406.08`

Find out the interest

I=A-P

substitute

`I=\$1,406.08-\$1,250.00\\I=\$156.08`