Question

Nathan put $200 in a savings account for two years. The interest rate is 5% and will be compounded annually. How much money will he have at the end of the two years?

Answer 1

Nathan will have $220.5 at the end of the two years.

Explanation:

We are given the following in the question:

P = $200

r = 5% = 0.05

t = 2 years

The compound interest is given by:

`A = p\bigg(1+(r)/(n)\bigg)^(nt)`

where A is the amount, p is the principal, r is the interest rate, t is the time in years and n is the nature of compound interest.

Putting values, we get,

For n = 1

`A = 200\bigg(1+(0.05)/(1)\bigg)^2\\\\A = \$220.5`

Thus, Nathan will have $220.5 at the end of the two years.