Question

Sarah deposited $1,800 into a savings account that earns 4% compound interest (her money is compounded annually for 7 years), what is the ending balance in her account?


Please show your work with a step-to-step guide below:

Answer 1

Answer:

$2368.68

Step-by-step explanation:

Use the equation for total amount involving compound interest:

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

A is the total amount.

P is the principle, the starting investment.

r is the compound interest rate annually.

n is number of compounding periods in a year.

t is the number of years.

Substitute the values known into the equation.

$A = 1800(1 + \frac{0.04}{1} )^{7*1}$

Simplify.

$A = 1800(1 + 0.04)^{7}$

$A = 1800(1 .04)^{7}$

Solve.

A = 2368.68   <= rounded to 2 decimal places

The ending balance in her account is $2368.68.