A savings certificate of $1700 pays 4.5% annual interest compounded yearly. What is the balance when the certificate matures in 5 years?

Question

anonymous · Answer

i hate interest system

amistre64 · Answer

you might want to recall the compound interest formula

anonymous · Answer

can you help me with this problem:
A savings certificate of $1700 pays 4.5% annual interest compounded yearly. What is the balance when the certificate matures in 5 years?

amistre64 · Answer

$$B_n=B_o(1+\frac{r}{n})^{nt}$$

amistre64 · Answer

in this case n=1 since its once per year

and t = 5 since its for 5 years

anonymous · Answer

what is my (o) and what is my (r)?

amistre64 · Answer

Bo is your initial balance:  1700 in this case.

and r is the rate that gets compounded.  but make sure you use the decimal format and not the % format

anonymous · Answer

ok so i would do 1700(1+0.045)

amistre64 · Answer

so far so good, now up that to 5

1700(1+.045)^5

amistre64 · Answer

with any luck, you end up with around 2119 :)

anonymous · Answer

:) 2118.25