What would be the total amount if Sara deposited $700 at 2% compound interest for 23 years?
To calculate the total amount that Sara will have after 23 years with compound interest, we need to use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = the total amount (ending balance)
P = the principal amount (initial deposit)
r = annual interest rate (expressed as a decimal)
n = number of times that interest is compounded per year
t = number of years
In this case:
P = $700
r = 2% = 0.02 (2% expressed as a decimal)
n = 1 (compounded annually)
t = 23 years
Now let's calculate the total amount:
A = $700 * (1 + 0.02/1)^(1 * 23)
A = $700 * (1 + 0.02)^23
A = $700 * (1.02)^23
To calculate this using a calculator, raise 1.02 to the power of 23 and then multiply the result by $700. The final amount will be the value you get.
You can also use a spreadsheet software, such as Microsoft Excel or Google Sheets, to simplify the calculation. In a cell, enter the formula "=700*(1+0.02)^23" (without quotation marks) to get the total amount directly.
By performing the calculation, the total amount would be approximately $1,303.10.