If you place $100 in a bank account that pays 6% at the end of each year,and you leave your $100 and all your interest in the bank,how much will you have in the bank at the end of 7 years with annual compounding?

Question

Quizplus · Accepted Answer

Using the formula for compound interest: A=P(1+r/n)^(n*t)

A= amount after time t
P= principal or initial amount
r= annual interest rate as a decimal
n= number of times interest is compounded per year
t= time in years

In this case, P=$100, r=0.06, t=7, compounded annually (n=1):

A= $100(1+0.06/1)^(1*7)
A= $100(1.06)^7
A= $100(1.5038)
A= $150.38

Therefore, the correct answer is D) 100*(1.06)^7.

If You Place $100 in a Bank Account That Pays