Question

How much would $400 be worth after 6 years, if it were invested at 2%interest compounded annually? (Use the formula below and round youranswer to the nearest cent.)

Answer 1

Solution

The formula to use is

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

From the question, we have

$\begin{gathered} P=\text{ \ }400 \\ \\ t=6\text{ }years \\ \\ r=2\text{ \%} \\ \\ r=0.02 \\ \\ n=1 \end{gathered}$

Using the parameters, we have

$\begin{gathered} A(t)=P(1+\frac{r}{n})^{nt} \\ \\ A(t)=400(1+\frac{0.02}{1})^6 \\ \\ A(t)=400(1.02)^6 \\ \\ A(t)=\text{ \ }450.46 \end{gathered}$

The answer is