IXL - Compound interest: word problems (Algebra 2 practice)

Henry opened a savings account and deposited $100.00 as principal. The account earns 8% interest, compounded annually. What is the balance after 4 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

Raymond opened a savings account and deposited $1,000.00 as principal. The account earns 13% interest, compounded annually. What is the balance after 5 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.

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.

$1,000.00

13%

0.13

once per year (annually)

5 years

Now plug these values into the equation and solve for

Plug in

1,000

0.13

and

1,000

0.13

Plug in

1,000

0.13

and

1,000

0.13

1,000

(

0.13

)

1,000

1.13

≈

1,842.4351793

≈

Round to the nearest cent

$1,842.44

Round to the nearest cent

To the nearest

cent,

the balance is $1,842.44.

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Work it out

Not feeling ready yet? These can help:

I.11Compound interest

B.3Evaluate variable expressions involving rational numbers

CC.3Solve exponential equations using natural logarithms

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