Question
Suppose that
is placed in an account that pays
interest compounded each year
Assume that no withdrawals are made from the account.
Follow the instructions below. Do not do any rounding.
(a) Find the amount in the account at the end of 1 year.
(b) Find the amount in the account at the end of 2 years.
Suppose that
|
Assume that no withdrawals are made from the account. |
Follow the instructions below. Do not do any rounding. |
(a) Find the amount in the account at the end of 1 year. |
|
(b) Find the amount in the account at the end of 2 years. |
|
Ask by Gonzalez Lewis. in the United States
Dec 08,2024
Upstudy AI Solution
Tutor-Verified Answer
Answer
(a) Amount at the end of 1 year:
(b) Amount at the end of 2 years:
(b) Amount at the end of 2 years:
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Beyond the Answer
When you invest money in an account with compound interest, the interest earned each year is added to the principal, and the next year’s interest is calculated on the new total. In your case, by the end of the first year, your balance grows to $9,000 + ($9,000 * 0.06) = $9,540. And after the second year, it continues to grow as we calculate interest on the new principal, leading to your figure of $10,112.4!
To see the full effect of compounded interest, consider how it accumulates over time. After several years, the growth becomes exponential! If you left the amount in the account for 10 years, it could grow to a staggering $16,208. That’s the magic of compound interest, where patience really pays off!