Question

Kennyhas$893inasavingsaccount.The interest rate is 8 1/5%, compounded annually.

Answer 1

• Principal (P) = $ 893
• Interest rate (r) = $8 \frac{1}{5} \% = \frac{41}{5} \% = \frac{41}{5 \times 100} = \frac{41}{500}$
• Number of times the amount is compounded per time period (n) = 1
• Time (t) = 5 years.
• Let the compound interest be I.
• Therefore,

$\sf \: I = P(1 + \frac{r}{n} {)}^{nt} - P \\ \sf = 893(1 + \frac{41}{500} ) ^{1 \times 5} - 893 \\ \sf= 893 \times ( \frac{541}{500} ) ^{5} - 893 \\ \sf= 1324.30 - 893 \\ \sf = 431.30$

Answer:

$431.30(approximate value)

Hope you could get an idea from here.

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