the joneses are saving up to go on a family vacation in 2 years. they invest $2400 into an account with an…
the joneses are saving up to go on a family vacation in 2 years. they invest $2400 into an account with an annual interest rate of 1.19% compounded annually. answer the questions below. do not round any intermediate computations, and round your final answers to the nearest cent. if necessary, refer to the list of financial formulas. (a) assuming no withdrawals are made, how much money is in the joneses account after 2 years? (b) how much interest is earned on the joneses investment after 2 years?
Answer
Explanation:
Step1: Recall compound - interest formula
The compound - interest formula is $A = P(1 + r)^t$, where $P$ is the principal amount, $r$ is the annual interest rate (as a decimal), and $t$ is the number of years. Here, $P=$2400$, $r = 0.019$ (since $1.9%=0.019$), and $t = 2$.
Step2: Calculate the amount in the account after 2 years
Substitute the values into the formula: $A=2400\times(1 + 0.019)^2=2400\times(1.019)^2=2400\times1.038361=$2492.0664$.
Step3: Calculate the interest earned
The interest earned $I=A - P$. So, $I = 2492.0664-2400=$92.0664\approx$92.07$.
Answer:
(a) $$2492.07$ (b) $$92.07$