A bank account pays 4 percent interest per year. If you deposit $1,000 into this account at the start of each year for three years, how much will your account balance be at the end of three years?

Question

Quizplus · Accepted Answer

In the first year, the account balance will be $1000. 
In the second year, the account balance will be $1000 (initial deposit) + $40 (interest on the first year's balance) + $1000 (second year's deposit)= $2040. 
In the third year, the account balance will be $2040 (second year's balance) + $81.6 (interest on the second year's balance) + $1000 (third year's deposit) = $3121.60.

Rounded to the nearest dollar, the account balance at the end of three years will be $3,246, which is choice B.

A Bank Account Pays 4 Percent Interest Per Year