On January 1, 2019, Alex deposited $5,000 into a savings account that pays interest of 5 percent, compounded annually. If he makes no further deposits or withdrawals, how much will Alex have in his account on December 31, 2021 (3 years later)?

Question

Quizplus · Accepted Answer

The formula for compound interest is A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest, P is the principal amount (the initial amount of money), r is the annual interest rate (decimal), n is the number of times that interest is compounded per year, and t is the time the money is invested for in years. In this case, P = $5,000, r = 5% or 0.05, n = 1 (since the interest is compounded annually), and t = 3 years. Plugging these values into the formula gives A = 5000(1 + 0.05/1)^(1*3) = 5000(1.05)^3 = $5,788.

On January 1, 2019, Alex Deposited $5,000 into a Savings