Suppose you deposit $2,000 in a savings account that pays interest at an annual rate of 4%. If no money is added or withdrawn, determine how much will be in the account after 3 years..
A. $2,249.73
B. $7,876.25
To find the amount in the account after 3 years, we can use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = the final amount in the account
P = the initial principal, which is $2,000
r = the annual interest rate, which is 4% or 0.04
n = the number of times interest is compounded per year, which is 1 (assuming the interest is compounded annually)
t = the number of years, which is 3
Plugging in the values:
A = 2000(1 + 0.04/1)^(1*3)
A = 2000(1 + 0.04)^3
A = 2000(1.04)^3
A = 2000(1.124864)
A = 2249.73
Therefore, the amount in the account after 3 years will be approximately $2,249.73. The answer is A.