Suppose you deposited $1500 into an account paying 3.5% interest compounded annually when your child was first born. Find the account balance when your child turns 18.
What formula would I use to solve this. I do NOT want the answer.
Thanks!
v=mv+b
FV = PV(1 + r/n)^nt
To find the account balance when your child turns 18, you can use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = the final account balance
P = the initial deposit amount ($1500 in this case)
r = the annual interest rate (3.5% in this case, or 0.035 as a decimal)
n = the number of times interest is compounded per year (in this case, once annually)
t = the number of years (18 in this case)
The formula can be written as:
A = 1500(1 + 0.035/1)^(1*18)
Please note that this assumes the interest is compounded once per year.
To solve this question, you would use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A is the future value of the investment
P is the principal amount (initial deposit)
r is the annual interest rate (in decimal form)
n is the number of times the interest is compounded per year
t is the number of years the money is invested for
In this case, the principal amount (P) is $1500, the annual interest rate (r) is 3.5% or 0.035 (in decimal form), and the money is invested for 18 years (t). The interest is compounded annually, so the compounding frequency (n) is 1.
By plugging these values into the formula, you can find the account balance when your child turns 18.