compound interest

Question

Compound Interest: 

If P dollars are deposited in an account that pays 5% annual interest, then the amount of money in the account after 3 years is P(1+0.05)³. Find the amount when P=$1000.

Answer 1

A = p(1+r/n)^nt

P = 1000

r = 0.05

n = 1

t = 3 

 

1000(1+0.05)³ = 1000(1.05)³ = $1157.63

Answer 2

the underlying formula that you want to use here to compute compound interest is

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

for this scenario that means taking

A = 1000(1 + 0.05/1)^(1*3)

A = 1157.63

meaning that after 3 years, $1157.63 will be the amount of money in the account