Question

Pedro puts $400.00 into an account to use for school expenses. The account earns 4% interest, compounded annually. How much will be in the account after 5 years? Use the formula A=P1+ r n nt, where A is the balance (final amount), P is the principal (starting amount), r is the interest rate expressed as a decimal, n is the number of times per year that the interest is compounded, and t is the time in years. Round your answer to the nearest cent.

Answer 1

After 5 years the amount in the account will be $ 487.

Step-by-step explanation:

Compound Interest, A = $P ( 1 + \frac{r}{n})^ {nt}$

Where A denotes the investment's future value

P is the Principal amount = $ 400.00

r is the rate of interest annually in decimals = 0.04

n is the no. of times the interest is compounded per unit time, t = 1

t - the number of years or days or months the amount is invested = 5 years

Now we have to plug in those values in the above formula as,

A = $400 ( 1 + \frac{0.04}{1})^ {1\times 5}$

   = 400(1+ 0.04)⁵

  = 400(1.04)⁵

 = 486.66 ≈ $ 487