Bank B offers Tyler 3% interest compounded annually. How much would Tyler’s investment be worth after 6 years in this account? Show your calculations below.
To calculate the value of Tyler's investment after 6 years with a 3% interest rate compounded annually, we can use the formula for compound interest:
A = P(1+r/n)^(nt)
Where:
A = the final amount
P = the initial principal (investment)
r = annual interest rate (as a decimal)
n = number of times interest is compounded per year
t = number of years
In this case:
P = the initial investment (unknown)
r = 3% = 0.03
n = 1 (compounded annually)
t = 6 years
A = the final amount (unknown)
Based on the information given, we can solve for A:
A = P(1+r/n)^(nt)
A = P(1+0.03/1)^(1*6)
A = P(1+0.03)^6
A = P(1.03)^6
We know that the final amount A will be the initial investment P multiplied by (1.03)^6.
Therefore, Tyler's investment would be worth P*(1.03)^6 after 6 years.