QUESTION BELOW

Question

The principal represents an amount of money deposited in a savings account subject to compound interest at the given rate.
Principal: $80,000

Rate: 2.5%

Compounded: daily

Time: 17 years

 

A. Find how much money there will be in the account after the given number of years. (Assume 365 days in a year.)

B. Find the interest earned.

 

Round to nearest hundredth as needed. 

 

I think the formula used would be A= P(1+r/n)^nt but I'm not sure.

Answer 1

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 = 80000(1 + 0.025/365)^(365*17)

A = 80000(1.529568) = 122,365.45

meaning that the final amount in the account is $122,365.45 and the amount of interest earned is $42,365.45

Answer 2

Yes, the formula you give is the appropriate one.