Question

suppose that $5500 is placed in an account that pays 13% 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. $\square$ (b) find the amount in the account at the end of 2 years. $\square$

Explanation:

Step1: Define compound interest formula

The annual compound interest formula is $A = P(1 + r)^t$, where $P=\$5500$, $r=0.13$, and $t$ is time in years.

Step2: Calculate 1-year amount

Substitute $t=1$ into the formula.
$A = 5500(1 + 0.13)^1 = 5500 \times 1.13$
$A = 6215$

Step3: Calculate 2-year amount

Substitute $t=2$ into the formula.
$A = 5500(1 + 0.13)^2 = 5500 \times (1.13)^2$
$A = 5500 \times 1.2769 = 7022.95$

Answer:

(a) $\$6215$
(b) $\$7022.95$