An investment account earns 4% per year compounded annually. If the initial investment was $4,000.00, how much is in the account after 3 years? Round your answer to the nearest dollar.
The account is $4,480 after 3 years with a 4% investment
Can you please show the process of getting to that answer? I would like to write down the process so I can fully understand the problem. Thanks!
To find the amount in the investment account after 3 years, we can use the formula for compound interest:
A = P(1 + r/n)^(n*t)
Where:
A = the future value of the investment
P = the principal (initial investment)
r = the annual interest rate (as a decimal)
n = the number of times interest is compounded per year
t = the number of years the investment is held for
In this case, the initial investment (P) is $4,000.00, the annual interest rate (r) is 4% which is equivalent to 0.04, the investment is compounded annually, so n = 1, and the investment is held for 3 years (t = 3).
Plugging these values into the formula, we get:
A = 4000(1 + 0.04/1)^(1*3)
A = 4000(1 + 0.04)^3
A = 4000(1.04)^3
Now we can calculate the value of A:
A = 4000(1.124864)
A ≈ 4499.46
After rounding to the nearest dollar, the amount in the investment account after 3 years is $4,499.