Zack deposited $1,200 in a savings account that paid 7.75%
interest compounded yearly. What was the balance in his account at
the beginning of the
third year?
a. $180
b. $270
c. $1,393.21
d. $1,470
To answer this question, we can use the formula for compound interest:
A = P(1 + r/n)^(n*t)
Where:
A = the final amount
P = the initial amount
r = the annual interest rate (as a decimal)
n = the number of times interest is compounded per year
t = the time period (in years)
In this case, we have:
P = $1,200 (the initial deposit)
r = 0.0775 (7.75% expressed as a decimal)
n = 1 (compounded yearly)
t = 3 (since we want to know the balance at the beginning of the third year)
Plugging these values into the formula, we get:
A = 1200(1 + 0.0775/1)^(1*3)
A = 1200(1.0775)^3
A = 1393.21
So the balance in Zack's account at the beginning of the third year is $1,393.21. Therefore, the answer is c. $1,393.21.