Finn deposited $3,500 in a new account at his bank.
The bank pays 5.5% interest compounded annually on this account.
Finn makes no additional deposits or withdrawals.
Which amount is closest to the balance of the account at the end of 3 years?
To find the balance of the account at the end of 3 years, we can use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = the final amount in the account
P = the principal (initial deposit)
r = the interest rate (as a decimal)
n = the number of times that interest is compounded per year
t = the number of years
In this case, P = $3,500, r = 5.5% = 0.055 (as a decimal), n = 1 (since interest is compounded annually), and t = 3 years.
Using these values, we can calculate the balance of the account:
A = 3,500(1 + 0.055/1)^(1*3)
A = 3,500(1 + 0.055)^3
A = 3,500(1.055)^3
A ≈ 3,500(1.16608)
A ≈ $4,081.28
Therefore, the balance of the account at the end of 3 years is closest to $4,081.28.