Sect 5.1 - Exponents: Multiplying And Dividing Common Bases Worksheet With Answers Page 7
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Interest Compounded Annually
If the principal P is invested in an account paying r% interest compounded
annually, then the total amount A in the account after t years is given by:
t
A = P(1 + r)
where r is converted to a decimal or fraction.
Solve the following:
Ex. 11
LaTonya invests $3300 in an account paying 8.9% annual
interest compounded annually. How much money does she have in the
account after five years?
Solution:
The principal is $3300, the rate is 8.9% = 0.089 and the time is 5
years:
t
A = P(1 + r)
(plug the values into the formula)
(5)
A = (3300)(1 + (0.089))
(#1-parenthesis, # 4-add)
5
= 3300(1.089)
(#2-exponents)
= 3300(1.53157898526)
(#3-multiply)
= 5054.21065137 ≈ 5054.21
Thus, there is $5054.21 in the account after five years.
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