suppose debra places $8500 in an account that pays 13% interest compounded each year. assume that no…
suppose debra places $8500 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. (b) find the amount in the account at the end of 2 years.
Answer
Explanation:
Step1: Recall compound - interest formula
The formula for compound interest is $A = P(1 + r)^t$, where $P$ is the principal amount, $r$ is the annual interest rate (in decimal form), and $t$ is the number of years. Here, $P=$8500$, $r = 0.13$, and we will calculate for different values of $t$.
Step2: Calculate the amount at the end of 1 year
Substitute $P = 8500$, $r=0.13$, and $t = 1$ into the formula $A = P(1 + r)^t$. $A_1=8500\times(1 + 0.13)^1=8500\times1.13 = 9605$
Step3: Calculate the amount at the end of 2 years
Substitute $P = 8500$, $r = 0.13$, and $t = 2$ into the formula $A = P(1 + r)^t$. $A_2=8500\times(1 + 0.13)^2=8500\times1.13^2=8500\times1.2769 = 10853.65$
Answer:
(a) $9605$ (b) $10853.65$