Question

Mandy deposited $80 in a savings account earning 5% interest, compounded annually. To the nearest cent, how much will she have in 2 years?

Answer 1

Answer:

$88.20

Step-by-step explanation:

We will use compound interest formula to answer this problem.

$A=P(1+\frac{r}{n})^{nt}$

A= Amount after t years.

P= Principal amount.  

r= Interest rate (decimal)

n=Period of compounding

t= Time.  

Upon substituting our given values in above formula we will get,

$A=80(1+\frac{0.05}{1})^{1\times 2}$    

$A=80(1+0.05)^{2}$  

$A=80(1.05)^{2}$  

$A=80\times 1.1025$

$A=88.2$

Therefore, Mandy will earn $88.20 in 2 years.