Question

you deposit $25,000 in an account that earns 2.1% interest compounded daily write the model for the situation and find out how much the balance is after 16 years.

Answer 1

Compound interest formula:

A = P (1+ r/n) ^tn

Where:

P = initial principal balance

r= interest rate (decimal form)

t = number of periods

n= number of times interest is compounded in the period

A= balance after t periods

Replacing:

A = 25,000 (1+ 0.021/365)^16*365

A = 25,000 (1 + 0.0000575)^5,840

A = $34,983.14