Finn deposited $3,500 in a new account at his bank.
The bank pays 5.5% interest compounded annually on this account.
Finn makes no additional deposits or withdrawals.
Which amount is closest to the balance of the account at the end of 3 years?
Responses
A $4,109.84
B $192.50
C $577.50
D $609.84
To calculate the balance of the account at the end of 3 years, we can use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = the final amount
P = the initial deposit
r = the interest rate (as a decimal)
n = the number of times interest is compounded per year
t = the number of years
In this case, P = $3,500, r = 0.055, n = 1 (compounded annually), and t = 3.
A = 3500(1 + 0.055/1)^(1*3)
A = 3500(1 + 0.055)^3
Using a calculator, we find that A ≈ $4,109.84.
So the answer is A) $4,109.84.