Question 831013: Trina has a collage fund started with a deposit of 10,000 which earns 5% annually. If no other monies are deposited, how much money will trina have in her fund at the end of three years
Answer by JulietG(1812)   (Show Source):
You can put this solution on YOUR website! There's a wonderful amortization calculator at http://www.myamortizationchart.com/. Enter the values and it will detail it for you. Here's how it works:
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You can't just multiply 0.05 * 3 * 100000 because there is compound interest. In other words, there is interest on the interest. Since this one is compounded yearly, it's considerably simpler.
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In year one, 10,000 * 0.05 = 500
Add that interest (500) to the principal 10,000 to get 10,500. That's what you have after the first year.
For year two, 10,500 * 0.05 = 525 in interest. Add that to the principal to get 10,500 + 525 = 11,025
For the third year, 11,025 * 0.05 = 551.25. Add that to the principal to get 11,025 + 551.25 = 11,576.25
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A long time ago, when I was your age, banks would actually pay you a rate close to this for your savings account. You can see how quickly it could add up!
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