SOLUTION:
Case: Compound Interest
Given:
deposit= $1000
rate= 7.2%
time= 5 years
Required: Find the account balance after 5 years
Method:
Step 1: Recall the Compound interest formula.
Amount, A is given as:
[tex]A=P(1+\frac{r}{n})^{nt}[/tex]Step 2:
From the above, n=1 because the interest is compounded annually,
Hence plugging the values gives
[tex]\begin{gathered} A=1000(1+\frac{0.072}{1})^{1\times5} \\ A=1000(1.072)^5 \\ A=1415.71 \end{gathered}[/tex]Final answer:
The account balance after 5 years is $1415.71
