Ashley has $5,000 in an account that earns 5% interest compounded annually.
To the nearest cent, how much will she have in 3 years?
To calculate the total amount Ashley will have in 3 years, we need to use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = the final amount
P = the principal amount (initial deposit)
r = annual interest rate (as a decimal)
n = number of times that interest is compounded per year
t = number of years
In this case, Ashley's initial deposit is $5,000, the interest rate is 5% (or 0.05 as a decimal), the interest is compounded annually (n = 1), and she wants to know the final amount after 3 years (t = 3). Putting these values into the formula:
A = 5000(1 + 0.05/1)^(1*3)
Simplifying the calculations inside the parentheses first:
A = 5000(1 + 0.05)^(3)
A = 5000(1.05)^(3)
A = 5000(1.157625)
A = $5788.13
So, Ashley will have approximately $5,788.13 in her account after 3 years.