Question

Suppose that $80,000 is invested at 9% interest. Find the amount of money in the account after 2 years if the interest is compounded annually.

Answer 1

We are asked to determine the amount of money if a certain amount is compounded annually. We will use the following formula:

$A=P(1+r)^t$

Where:

$\begin{gathered} A=\text{ future amount} \\ r=\text{ interest rate in decimal form} \\ t=\text{ time} \end{gathered}$

The decimal form of the interest rate is the following:

$r=\frac{9}{100}=0.09$

Now we substitute the given values in the formula:

$A=(80000)(1+0.09)^2$

Now we solve the operations:

$A=95048$

Therefore, after two years the amount is $95048.