Suppose that $6500 is placed in an account that pays 12% interest compounded each year.
1 answer:
The amount after 1 year is $7280 and the amount after two year is $8153.
Given that $6500 is placed in an account that pays 12% interest compounded each year.
Compounding is the addition of interest to the principal of a loan or deposit, or in other words, interest on principal plus interest.
Compounded interest=12%
Principal amount=$6500
Time period = 1 year
where P is Principle amount, r is annual interest, n is number of times the interest compounded monthly, t is number of years
Here P=6500, r=12%, n=1, t=1
Substitute these values in the formula, we get
A=6500(1+(0.12/1))¹⁽¹⁾
A=6500(1+0.12)¹
A=6500×1.12
A=7280
Now we have to calculate for two years.
That is if n=2 , then
A=6500(1+(0.12/1))¹⁽²⁾
A=6500(1+0.12)
A=6500×1.2544
A=8153.6
Hence, the amount for one year and two year when $6500 is placed in an account that pays 12% interest compounded is $7280 and $8153.60.
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