deposit it $2,000 in an account that pays 3% how much is your balance at the end of 8 years
Is the interest simple of compounded every year?
3%compound interest
So that means each year, your amount will increase by 3%, or, will be (1+0.03), that is, (1.03) times more.
Final Amount = Initial amount * (1.03)^t
= 2000 * (1.03)^8
= 2000 * 1.266
= $2533
Good work, Arora. A question you need to usually ask on these, is "is it simple interest, or compound interest, compounded how often (daily, monthly, pr annually?)"
Students often read over these details when they decide they need help.
To calculate the balance at the end of 8 years, you need to use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = the final amount (balance)
P = the principal amount (initial deposit)
r = the annual interest rate (in decimal form)
n = the number of times interest is compounded per year
t = the number of years
In this case, you have an initial deposit of $2,000, an interest rate of 3% (0.03), and the interest is compounded annually. So, the formula becomes:
A = 2000(1 + 0.03/1)^(1*8)
Simplifying:
A = 2000(1 + 0.03)^8
A = 2000(1.03)^8
A = 2000(1.270678)
A ≈ $2,541.36
Therefore, your balance at the end of 8 years will be approximately $2,541.36.