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Popular Word Problems >

Alec opened a savings account and deposited 100.00 as principal. The account earns 12% interest, compounded annually. What is the balance after 5 years?

Solution

A l ec o p e n e d a s a v in g s a cco u n t an d d e p os i t e d 100.00 a s p r in c i p a l . T h e a cco u n t e a r n s 12% in t eres t, co m p o u n d e d ann u a ll y . Wha t i s t h e ba l an ce a f t er 5 ye a rs ?

Solution

Amount : 176.23

Solution steps

Translate the problem into an equation:

A = 100 (1 + \frac{0.12}{1})^{1 \cdot 5}

100 (1 + \frac{0.12}{1})^{1 \cdot 5} = 176.23416 \dots

Round to the nearest hundredth:

176.23

Amount : 176.23

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