Liam puts $2,000 in the bank with a 3% annual interest rate compounded annually. If Liam does not touch his money, how much money will he have after two years?
Responses
A$2,000.06
$2,000.06
B$2,060.00
$2,060.00
C$2,120.00
$2,120.00
D$2,121.80
The correct answer is D$2,121.80.
To calculate the amount of money Liam will have after two years, we can use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = the future value of the investment
P = the principal amount (the initial deposit)
r = the annual interest rate (expressed as a decimal)
n = the number of times that interest is compounded per year
t = the number of years the money is invested for
In this case, P = $2,000, r = 0.03, n = 1 (compounded annually), and t = 2. Plugging in these values, we get:
A = $2,000(1 + 0.03/1)^(1*2)
A = $2,000(1 + 0.03)^2
A = $2,000(1.03)^2
A = $2,000(1.0609)
A = D$2,121.80
Therefore, Liam will have $2,121.80 after two years.