If are deposited into an account with
a interest rate, compounded
annually, what is the balance after 6 years?

To calculate the future balance, we can use the formula . Here, , (which is 4.5% as a decimal), (since it’s compounded annually), and (for the 6 years). Plugging in the values, we get:

Now calculate :

So,

Thus, the balance after 6 years is approximately .

Interest rates have a fascinating history! In ancient Babylon, they had a system for loans with interest rates that could reach as high as 33%. It was a community-driven approach where the interest paid was often reinvested in communal projects. This laid the groundwork for the more complex financial systems we have today!

Looking to apply this interest calculation to real life? Imagine you’re setting aside money for a vacation. If you deposit that $500, you may not think it’s much at first, but with the right interest rate, you’ll be pleasantly surprised by how much it grows over time! So next time you’re planning a financial goal, remember to leverage the power of compound interest for a brighter bank account!