Suppose that you deposit $1735.50 in a savings account that pays 9.25% annual interest with interest created to the account at the end of each year. Assuming no withdrawals are made, find the balance in the account after 4 years
1735.50(1.0925)^4
To find the balance in the account after 4 years, we need to calculate the compound interest.
The formula for compound interest is:
A = P(1 + r/n)^(nt)
Where:
A = the final account balance
P = the initial deposit
r = annual interest rate (in decimal form)
n = number of times interest is compounded per year
t = number of years the money is invested for
In this case, the initial deposit (P) is $1735.50, the annual interest rate (r) is 9.25% or 0.0925, and the money is compounded once per year (n = 1).
Plugging the values into the formula, we get:
A = 1735.50(1 + 0.0925/1)^(1*4)
Simplifying the equation inside the parentheses:
A = 1735.50(1.0925)^4
Using a calculator, calculate 1.0925 raised to the power of 4, and multiply that result by the initial deposit of $1735.50:
A ≈ 1735.50(1.41255)
A ≈ $2448.65
Therefore, the balance in the account after 4 years would be approximately $2448.65.