Question

Ernesto has $70 in a savings account. The interest rate is 5%, compounded annually. To the nearest cent, how much will he have in 3 years?

Answer 1

Answer: $81.03

Explanation:

The interest is compounded annually which means that the future value formula applies:

Future value = Amount * ( 1 + rate) ^ number of years

Amount = $70

Rate = 5%

Number of years = 3 years

In 3 years, Ernesto will have:

= 70 * ( 1 + 5%)³

= $81.03