Question

Mr. Wilkins deposited $2500 in a new account at his bank. The bank pays 6.5% interest compounded annually . Which amount is closest to the balance of the account at the end of 2 years?
A $2,835.56
B $2,825.00
C $2,662.50
D $2,513.00

Answer 1

Answer: $2,835.56 (Choice A)

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Work Shown:

A = P(1+r/n)^(n*t)

A = 2500*(1+0.065/1)^(1*2)

A = 2,835.5625

A = 2,835.56

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In the compound interest formula above, I used

• P = 2500 = deposit amount
• r = 0.065 = decimal form of 6.5% interest
• n = 1 = compounding frequency of 1 time per year (annually)
• t = 2 = number of years