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Topic: "Compounding interest word problems" "Chelsea invests $4,060 in a savings account with a fixed annual interest rate of 8%, compounded 12 times per year. What will the account balance be after 7 years?"

Answer :

Compound interest formula:

[tex]A=P(1+\frac{r}{n})^{nt}[/tex]

A is the final amount

P is the principal amount

r is the interest rate (in decimals)

n is the number of times interest is compound

t is the time in years

For the given situation:

[tex]\begin{gathered} P=4,060 \\ r=0.08 \\ n=12 \\ t=7 \\ \\ A=4,060(1+\frac{0.08}{12})^{12\cdot7} \\ \\ A=4,060(1+\frac{0.08}{12})^{84} \\ \\ A\approx7,094.53 \end{gathered}[/tex]

Then, the balance after 7 years is $7,094.53

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