Question

Suppose Kaitlin places $ 4000 in an account that pays 18% interest compounded each year.

Assume that no withdrawals are made from the account.
Follow the instructions below. Do not do any rounding.
(a) Find the amount in the account at the end of 1 year.
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(b) Find the amount in the account at the end of 2 years.

Answer 1

a) $4720

b) $5569.60

Explanation:

Initial amount = $4000

Interest rate = 18% PA compounded

Amount after 1 year

• $4000*1.18 = $4720

Amount after 2 years

• $4720*1.18 = $5569.60