Question

Suppose Lisa places $8500 in an account that pays 16% interest compounded each year. Assume that no withdrawals are made from the account.
Follow the instructions below. Do not do any rounding.

(a) Find the amount in the account at the end of 1 year.

(b) Find the amount in the account at the end of 2 years.

Answer 1

You can use the compounded formula.
$A = P(1 + \frac{r}{n})^{nt}$

A = total amount 
P = principal or amount of money deposited,
r = annual interest rate 
n = number of times compounded per year
t = time in years

$A = 8500(1 + \frac{.16}{1})^{1\times1}$   <------ First Year

$A = 8500(1 + \frac{.16}{1})^{1\times2}$   <-----Second Year

A = $9860           <----First Year

A = $11,437.60   <----Second Year