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

Question

Naveen

Business

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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Answers (1)

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Ibrahim Bartlett · Answer 1

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