SOLUTION: Suppose you deposit $100 in a savings account that compounds annually at 2%. After 1 year at this rate, the bank changes its rate of compounding to 1.5% annually. Assuming the comp

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Question 1015075: Suppose you deposit $100 in a savings account that compounds annually at 2%. After 1 year at this rate, the bank changes its rate of compounding to 1.5% annually. Assuming the compounding rate does not change for 4 additional years, how much will your account be worth at the end of the 5-year period?
Answer by robertb(5830) About Me  (Show Source):
You can put this solution on YOUR website!
Use the compound balance formula A+=+P%281%2Br%2Fn%29%5E%28nt%29.
For the first year, P = 100, r = 0.02, n = 1, and t = 1.
==>+A+=+100%281%2B0.02%2F1%29%5E1+=+102
Hence the balance after 1 year is $102.
For the next 4 years,
P = 102, r = 0.015, n = 1, and t = 4.
Hence, A+=+102%281%2B0.015%2F1%29%5E4+=+102%2A1.015%5E4+=+108.26
Therefore the account will be worth $108.26 at the end of the 5-year period.