IXL - Compound interest: word problems (Algebra 1 practice)

Mia opened a savings account and deposited $500.00 as principal. The account earns 15% interest, compounded annually. What is the balance after 9 years?

Use the formula

where

is the balance (final amount),

is the principal (starting amount),

is the interest rate expressed as a decimal,

is the number of times per year that the interest is compounded, and

is the time in years.

Round your answer to the nearest cent.

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Learn with an example

question

Deion opened a savings account and deposited $800.00. The account earns 1% interest, compounded annually. If he wants to use the money to buy a new bicycle in 2 years, how much will he be able to spend on the bike?

Use the formula

where

is the balance (final amount),

is the principal (starting amount),

is the interest rate expressed as a decimal,

is the number of times per year that the interest is compounded, and

is the time in years.

Round your answer to the nearest cent.

key idea

Compound interest:

is the balance (final amount).

is the principal (starting amount).

is the interest rate expressed as a decimal.

is the number of times per year that the interest is compounded.

is the time in years.

solution

You want to find the balance,

First, list the other variables in the equation

and specify their given values.

$800.00

0.01

once per year (annually)

2 years

Now plug these values into the equation and solve for

Plug in

800

0.01

and

800

0.01

Plug in

800

0.01

and

800

0.01

800

(

0.01

)

800

1.01

≈

816.08

≈

Round to the nearest cent

$816.08

Round to the nearest cent

To the nearest

cent,

Deion will be able to spend $816.08.

Looking for more? Try these:

Lesson: Exponential growth

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Lesson: Exponential growth

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