SOLUTION: Latifah opens a bank account with $800. The account accrues 6% interest compounded annually. How much money will she have in her account at the end of 2 years, rounded to the ne

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Question 896221: Latifah opens a bank account with $800. The account accrues 6% interest compounded annually.
How much money will she have in her account at the end of 2 years, rounded to the nearest cent?
Answer by jim_thompson5910(35256) About Me  (Show Source):
You can put this solution on YOUR website!
We'll be using the formula A+=+P%2A%281%2Br%2Fn%29%5E%28n%2At%29 where
A = amount in the account after t years
P = initial deposit (principal)
r = interest rate as a decimal
n = compounding frequency
t = number of years

In this case,

A = unknown (we're solving for it)
P = 800
r = 0.06 (6% = 6/100 = 0.06)
n = 1 (compounded annually = compounding 1 time per year)
t = 2 years

Plug all this info into the formula to get...


A+=+P%2A%281%2Br%2Fn%29%5E%28n%2At%29

A+=+800%2A%281%2B0.06%2F1%29%5E%281%2A2%29

A+=+800%2A%281%2B0.06%29%5E%281%2A2%29

A+=+800%2A%281.06%29%5E%281%2A2%29

A+=+800%2A%281.06%29%5E%282%29

A+=+800%2A%281.1236%29

A+=+898.88


She will have $898.88 in the account at the end of the two years.


Side Note: She has earned A - P = 898.88 - 800 = $98.88 in interest alone.