If the money and interest are left in the bank, how much is the total accumulated savings at the end of the second year for a savings of $3,500 at 8% annually compounded interest?
A. $3,742.30
B. $3,895.53
C. $3,935.10
D. $4,082.40

Question

If the money and interest are left in the bank, how much is the total accumulated savings at the end of the second year for a savings of $3,500 at 8% annually compounded interest? 
	A.	$3,742.30
	B.	$3,895.53
	C.	$3,935.10
	D.	$4,082.40

tkhunny · Answer

What have you tried?

anonymous · Answer

I did the depreciation formula but that was definitely wrong. I'm not exactly sure how to solve this.

anonymous · Answer

@tkhunny

tkhunny · Answer

It's a savings account.  It should grow.

3500*(1.08)^2 =

anonymous · Answer

Where did you get the 1.08? @tkhunny

tkhunny · Answer

The problem statement.  "8% annually compounded interest"

anonymous · Answer

@tkhunny Oh, i thought it would be 0.08, not 1.08

tkhunny · Answer

If you wish to calculate Simple Interest and use I = p*r*t, then you would use t = 0.08.  This is compound interest and we're no longer in that world.  The Compound Accumlation factor associated with 8% interest compounded annually, is 1.08.

anonymous · Answer

Ohhhh ok, thanks so much @tkhunny!!

anonymous · Answer

@tkhunny so the answer is D?

tkhunny · Answer

That's what I get.  Do you doubt?

anonymous · Answer

@tkhunny Nope! Cause that's the answer I got! But I have a question...

anonymous · Answer

Is this the formula I'm supposed to use for this kind of problem?
A= P(1+r)^t

anonymous · Answer

@tkhunny

tkhunny · Answer

Yes.  That is a single deposit (P), accumulated at some periodic interest rate (r) for a specified number of periods, (t).

In your problem, we have P = 3500, r = 0.08, and t = 2

anonymous · Answer

Oh okay! Thanks again @tkhunny :)