How much money will Bill have in the account in 7 years?

Question

A bank features a savings account that has an annual interest rate of r=5.3% with interest compounded daily. Bill deposits $8,500 into the account.
The account balance can be modeled by the exponential formula A(t)=P(1+r/n)^nt , where A is the future value, P is the principal, r is the annual interest rate, n is the number of times each year that the interest is compounded, and t is the time (in years).

 

1) What values should be used for P, r, and n?
P=, r=, n=

2) How much money will Bill have in the account in 7 years?

Bill will have $___ in the account in 7 years.

Answer 1

Hi Christy,

 

1) P = 8500

 

  r=.053

 

n=365  

 

2) using 365 for each year instead of counting an extra day or two for leap years

 

A = (8500)( 1 + .053/365)^365·7

 

A = 12,317.72