Ashley has $5,000 in an account that earns 5% interest compounded annually.
To the nearest cent, how much will she have in 3 years?
To calculate the amount Ashley will have in 3 years with 5% interest compounded annually, 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 or loan amount)
r = the annual interest rate (in decimal form)
n = the number of times that interest is compounded per year
t = the number of years
In this case, Ashley has $5,000 and it earns 5% interest compounded annually, so:
P = $5,000
r = 5% = 0.05
n = 1 (compounded annually)
t = 3 years
Plugging in these values into the formula, we get:
A = 5000(1 + 0.05/1)^(1*3)
Simplifying the equation:
A = 5000(1.05)^3
Calculating:
A = 5000(1.157625)
A = $5788.12
To the nearest cent, Ashley will have approximately $5,788.12 in 3 years.