Luke has $40 in a savings account that earns 5% interest, compounded annually. To the nearest cent, how much interest will he earn in 3 years?

Question

Luke has $40 in a savings account that earns 5% interest, compounded annually.

To the nearest cent, how much interest will he earn in 3 years?

Use the formula B = p(1 + r)t, where B is the balance (final amount), p is the principal (starting amount), r is the interest rate expressed as a decimal, and t is the time in years.

Answer 1

substitute the values

B=40(1+.05)³

B=40(1.05)³

B=40(1.157625)

B=46.31

The interest is 46.31 - 40 = 6.31

 

To just find the interest you could solve it by using   I=p(r)^t