A principal of $2200 is invested at 3.25% interest, compounded annually. How much will the investment be worth after 13 years? Use the calculator provided and found your answer to the nearest dollar.

Question

A principal of $2200 is invested at 3.25% interest, compounded annually. How much will the investment be worth after 13 years? Use the calculator provided and found your answer to the nearest dollar.

Answer 1

Let S = Sum after 13 years

So = amount invested

t = time in years

i = annual interest rate = .0325

The S = So(1+i)^t = $2,200(1.0325)¹³ = $3,334.21

Answer 2

Once you know the compound interest formula, it's just plugging numbers in. A = P(1 + r/n)^tn. Where "n" is the number of times the interest is compounded per year. And since it is compounded annually, n = 1, simplifying the formula to A = P(1 + r)^t. Sweet!

A = 2200(1 + 0.0325)¹³ = you can type this in your calculator :)

Something to look out for is to always represent your interest rate as a decimal (ie move the decimal left 2 places). Hope that helps :)