If a depositor puts R100 in a bank account that earns 4 per cent interest compounded annually, how much will be in the account after five years?
A)R104.00
B)R120.00
C)R121.67
D)R123.98
E)R400.00

Question

Quizplus · Accepted Answer

The formula for compound interest is: 
A = P(1+r/n)^(nt) 
Where: 
A = the total amount of money in the account after t years 
P = the principal amount (the initial deposit) 
r = the annual interest rate (as a decimal) 
n = the number of times the interest is compounded per year 
t = the number of years

In this case: 
P = R100 
r = 0.04 
n = 1 (compounded annually) 
t = 5

Using the formula: 
A = R100(1+0.04/1)^(1*5) 
A = R100(1.04)^5 
A = R100(1.21665) 
A = R121.67

Therefore, the answer is C.

If a Depositor Puts R100 in a Bank Account That