business math

Question

You deposit $1,000 for 4 years at an interest rate of 2.0%. If the interest is compounded annually, how much money do you have after 4 years?

Answer 1

the underlying compound interest formula that you want to use on this one is

A = P(1 + r)^t

for this set of parameters that means taking

A = 1000(1 + 0.02)^4

A = 1082.43

meaning that after 4 years you would have approximately $1,082.43 in your account

Answer 2

You may need to use the compound interest formula :

 

A = P ( 1+ r/k )^kt

 

P = 1000, r = 0.02, k = 1 (annually) , t = 4

 

A = 1000 ( 1+ 0.02/1 )¹⁽⁴⁾

   = 1000 (1.02)⁴

   = 1082.43

 

Hopes this help! :)