Question

Lou has an account with $10,000 which pays 6% interest compounded annually. If to that account, Lou deposits $5,000 at the beginning of each year for 2 years, find out the amount in the account after the last deposit. a. $10,300.00 c. $21,500.00 b. $20,300.00 d. $22,154.00

Answer 1

Answer:

Option d. $22154 is the right answer.

Step-by-step explanation:

To solve this question we will use the formula $A=P(1+\frac{r}{n})^{nt}$

In this formula A = amount after time t

                        P = principal amount

                        r = rate of interest

                       n = number of times interest gets compounded in a year

                        t = time

Now Lou has principal amount on the starting of first year = 10000+5000 = $15000

So for one year $A=15000(1+\frac{\frac{6}{100}}{1})^{1\times1}$

$= 15000(1+.06)^{1}$

$= 15000(1.06)$ = $15900

After one year Lou added $5000 in this amount and we have to calculate the final amount he got

Now principal amount becomes $15900 + $ 5000 = $20900

Then putting the values again in the formula

$A=20900(1+\frac{\frac{6}{100}}{1})^{1\times1}$

$= 20900(1+.06)^{1}$

$= 20900(1.06)=22154$

So the final amount will be $22154.