Find the value after five years of a $3,000 savings account that pays 3% interest compounded yearly. Round the answer to two decimal places
To find the value after five years, we can use the formula for compound interest:
A = P(1 + r/n)^(nt)
where:
A = the future value of the investment/loan, including interest
P = the principal investment amount (the initial deposit)
r = annual interest rate (as a decimal)
n = number of times that interest is compounded per year
t = number of years
Given:
P = $3,000
r = 3% = 0.03
n = 1 (compounded yearly)
t = 5 years
A = 3,000(1 + 0.03/1)^(1*5)
A = 3,000(1.03)^5
A ≈ 3307.61
Therefore, the value after five years will be approximately $3,307.61.