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17 September, 19:23

Suppose you had $100 in a savings account and the interest rate was 2 percent per year. After 5 years, how much do you think you would have in the account if you left the money to grow? A. More than $102B. Exactly $102C. Less than $102

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  1. 17 September, 19:26
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    A. More than $102

    Explanation:

    Given the Principal amount, P = $100

    interest rate, r was 2 percent per year = 2/100

    n = 1 = the interest is calculated yearly

    After time, t of 5 years, the Principal will have increase to?

    using the formula for compound interest:

    Compound interest for 5 years = P (1 + r/n) ^nt

    = $100 (1 + (0.02/1)) ^ (1*5)

    = $100 (1.02) ^5

    = $100 * 1.104 = $110.41

    After time, t of 5 years, the Principal will have increase to $110.41 which is more than $102
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