# math 115 #17

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If \$5,600 is deposited into an account paying 5% interest compounded annually (at the end of each year), how much money is in the account after 3 years?

This is what I get"
5600 X .05 =280 X 3 =840

• math 115 #17 -

But what happened to your original \$5,600????

Also -- since the interest is compounded annually, at the end of the first year you'll have \$5,600 + 280 = \$5,880

At the end of the second year:
5,880 * 0.05 = 294
294 + 5,880 = \$6,174

What will you have at the end of the third year?

• math 115 #17 -

Anyway, the way to do this is the folliwing.
For every year your money is on the bank, the bank multiplies your balance by 1.05. This means that after 3 years, you get the following:

Money after 3 years = inititial deposit*1.05*1.05*1.05 = 5600 * 1.05^3 = 6482.7

• math 115 #17 -

you have calculated the simple interest earned by the account after 3 years.
So your account would have 5600 + 840 in it or \$6440

in reality you would probably earn compound interest and the amount would be
5600(1.05)^3
= \$6482.70

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