Question

Lin is saving $300 per year in an account that pays 4.5% interest per year, compounded annually. How do I find the value after 20 years?

Answer 1

The value after 20 years is $ 723.514

Solution:

Formula for Amount compounded annually is as follows:

$\mathrm{A}=P\left(1+\frac{r}{100}\right)^{n}$

Where,

"A" is the total amount

"p" is the principal sum

"r" is the rate of interest

"n" is the number of years

From given question,

p = $ 300

r = 4.5 %

n = 20 years

Substituting the values we get,

$\begin{aligned}&A=300\left(1+\frac{4.5}{100}\right)^{20}\\\\&A=300(1+0.045)^{20}\\\\&A=300(1.045)^{20}\\\\&A=300 \times 2.41171=723.514\end{aligned}$

Thus value after 20 years is $ 723.514