Question

Brandy deposits $200 each year into her savings account. It earns 3% annual interest compounded annually. About how much will be in her account at the end of 3 years?

Answer 1

Hello! 3% interest is earned annually and $200 is added per year. 3% is 0.03 in decimal form. Let's add 1 to that number. 1 + 0.03 is 1.03. Let's multiply that by 200. 200 * 1.03 is 206. That's the amount after 1 year. Add 200 to that amount. 206 + 200 is 406. Multiply that amount by 1.03. 406 * 1.03 is 418.18. That is the amount after the second year. Now, add 200 to that amount. 418.18 + 200 is 618.18. Multiply that amount by 1.03. 418.18 * 1.03 is 636.7254 or 637 when rounded to the nearest whole number. Keep in mind that we add 200 each year and then multiply the amount by 103% (1.03) after that. There. Brandy will have about $637 after 3 years. The answer is C: $637.