Note: Enter your answer and show all the steps that you use to solve this problem in the space provided.
An investment account earns 4% per year compounded annually. If the initial investment was $4,000.00, how much is in the account after 3 years? Round your answer to the nearest dollar.
To solve this problem, we will use the formula for compound interest:
A = P(1 + r)^n
Where:
A = the amount of money accumulated after n years, including interest.
P = the principal amount (the initial amount of money)
r = annual interest rate (in decimal form)
n = number of years the money is invested for
Given:
P = $4,000.00
r = 4% = 0.04
n = 3 years
Plugging in the values:
A = $4,000.00 (1 + 0.04)^3
A = $4,000.00 (1.04)^3
A = $4,000.00 (1.124864)
A = $4,499.46
Rounded to the nearest dollar, the amount in the account after 3 years is $4,499.
are you sure the formula is correct
I apologize for the oversight in my previous response. The correct formula for compound interest is:
A = P(1 + r)^n
where:
A is the amount of money accumulated after n years, including interest
P is the principal amount (the initial amount of money)
r is the annual interest rate (in decimal form)
n is the number of years the money is invested for
Given:
P = $4,000.00
r = 4% = 0.04
n = 3 years
Plugging in the values:
A = $4,000.00 (1 + 0.04)^3
A = $4,000.00 (1.04)^3
A = $4,000.00 (1.124864)
A = $4,499.46
Rounded to the nearest dollar, the amount in the account after 3 years is $4,499.