Question

Lamar has $90 in a savings account that earns 5% interest, compounded annually.To the nearest cent, how much will he have in 3 years?

Answer 1

The Solution:

Given:

$90 in a saving account that earns 5% interest compounded annually.

Required:

Find the amount that will be in the account in 3 years to the nearest cent.

Step 1:

We shall use the formula below:

$A=p(1+\frac{r}{100})^n$

In this case,

A = amount in the account=?

P = principal= $90

r = rate per annum = 5%

n = number of years = 3 years

Step 2:

Substituting these values in the formula.

$A=90(1+\frac{5}{100})^3$$\begin{gathered} A=90(1+0.05)^3=90(1.05)^3=104.1863\approx\text{ \ 104.19} \\ \\ \text{ or A = 10419 cents} \end{gathered}$

Therefore, the correct answer is $104.19 (or 10419 cents)