Tammy opened a savings account and deposited $300.00 as principal. The account earns 14% interest, compounded annually. What is the balance after 2 years?
Use the formula A=P1+
r
n
nt, where A is the balance (final amount), P is the principal (starting amount), r is the interest rate expressed as a decimal, n is the number of times per year that the interest is compounded, and t is the time in years.
Round your answer to the nearest cent.
Given:
Principal (P) = $300.00
Interest rate (r) = 14% = 0.14 (expressed as a decimal)
Number of times interest is compounded per year (n) = 1
Time (t) = 2 years
Using the formula A = P(1 + r/n)^(nt), we plug in the given values:
A = $300(1 + 0.14/1)^(1*2)
A = $300(1 + 0.14)^2
A = $300(1.14)^2
A = $300(1.2996)
A = 389.88
Rounded to the nearest cent, the balance after 2 years is $389.88.