Question

You deposit $1000 each year into an account earning 7% interest compounded annually. How much will you have in the account in 30 years?

Answer 1

SOLUTION

Given the question in the question tab, the following are the solution steps to answer the question.

STEP 1: Write the formula for calculating Compound Amount

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

Where A =final amount

P=initial principal balance

r=interest rate

n=number of times interest applied per time period

t=number of time periods elapsed

STEP 2: Write the given parameters

$P=1000,r=\frac{7}{100}=0.07,t=30,n=1\text{ since it is compounded annually}$

STEP 3: Calculate the compounded amount

$\begin{gathered} A=1000(1+\frac{0.07}{1})^{1\times30} \\ A=1000(1.07)^{30} \\ A=1000(7.612255043) \\ A=7612.255043 \\ A\approx\text{\ }7612.26\text{ } \end{gathered}$

Hence, the amount in the account after 30 years is $7612.26 to the nearest cents