Suppose that 7000 is placed in an account that pays 3% interest compounded each year.Assume that no withdrawals are made from the account. Do not do any rounding. Find the amount in the account at the end of 2 years.

Solution

S u pp ose t ha t 7000 i s pl a ce d in an a cco u n t t ha t p a ys 3% in t eres t co m p o u n d e d e a c h ye a r . A ss u m e t ha t n o w i t h d r a w a l s a re ma d e f ro m t h e a cco u n t . Do n o t d o an y ro u n d in g . F in d t h e am o u n t in t h e a cco u n t a t t h e e n d o f 2 ye a rs .

Amount : 7426.3

Solution steps

Translate the problem into an equation:

A = 7000 (1 + \frac{0.03}{1})^{1 \cdot 2}

7000 (1 + \frac{0.03}{1})^{1 \cdot 2} = 7426.3

Amount : 7426.3