If you place $10,000 in a savings account that pays 3 percent interest per year and you leave all the money, principal plus interest earned, in the account for three years, approximately how much money will you have at the end of the three years?

Question

Quizplus · Accepted Answer

The interest earned each year is added to the principal, which is the definition of compound interest. The formula for compound interest is $A = P(1 + r)^n$, where $A$ is the amount of money accumulated after n years, including interest, $P$ is the principal amount, $r$ is the annual interest rate (decimal), and $n$ is the number of years the money is deposited or borrowed for. Plugging in the given values: $A = 10000(1 + 0.03)^3 = 10000(1.03)^3 \approx 10927$.

If You Place $10,000 in a Savings Account That Pays