you deposit $1200 in a savings account that earns interest at a 3% rate per year. how much interest will you have earned after 3 years

Question

need help answering it

Answer 1

You need the compound interest formula:

 

A = P(1 + r/n)^nt 

 

A is the amount accumulated, P is the principle (initial) amount, r is the decimal rate, n is the number of times interest is compounded per year, and t is the number of years.

 

In this question, we are solving for A, P is $1200, r is 0.03, n is 1 (because interest is compounded once per year), and t is 3 years.

 

Thus:

 

A = $1200(1 + 0.03/1)¹⁽³⁾ = $1200(1.03)³ = $1311.27

 

and

 

Interest earned = 1311.27 - 1200 = $111.27

Answer 2

A = P(1 + r/n)^nt for compound interest

A = final amount

p = principal invested

r = interest rate as a decimal

t = # years invested

 

In this case A = 1200(1 + .03/1)¹⁽³⁾

A = 1200(1.03)³

A = 1311.27

 

To find how much of the final total was interest you must subtract out the principal amount invested

I = 1311.27 - 1200 = $111.27