Tim deposited $1,400 in a savings account that paid 7.5%
interest compounded yearly. What was the balance in his account at
the beginning of
the third year?
a. $210
b. $1,715
c. $315
d. $1,617.88
Using the formula for compound interest:
A = P(1 + r/n)^(nt)
where:
A = final amount
P = principal (initial deposit)
r = interest rate (as a decimal)
n = number of times interest is compounded per year
t = time in years
Plugging in the given values:
A = 1400(1 + 0.075/1)^(1*2)
A = 1400(1.075)^2
A = 1617.88
Therefore, the answer is d. $1,617.88.