Question 83064: Mrs. Niss put $500 in a savings account upon opon which the bank pays an annual yeild of 4%. Because 4% of $500 is $20, and 10 times 20 is $200, Mrs. Niss thinks that the amount in the account after 10 years will be $700($500 + $200). explain why this reasoning is incorrect. If the annual yield continues to be 4%, what will be the amount in the account after 10 years?
Answer by stanbon(75887)   (Show Source):
You can put this solution on YOUR website! Mrs. Niss put $500 in a savings account upon opon which the bank pays an annual yeild of 4%. Because 4% of $500 is $20, and 10 times 20 is $200, Mrs. Niss thinks that the amount in the account after 10 years will be $700($500 + $200). explain why this reasoning is incorrect. If the annual yield continues to be 4%, what will be the amount in the account after 10 years?
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The interest earned each year must be included in the amount that increases
by 4%.
A(t)=500(1+0.04)^10 = $740.12
Cheers,
Stan H.
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