Question

If you deposit $3,100 today into an account earning an annual rate of return of 7 percent, what would your account be worth in 30 years?

If you deposit $5,000 today into an account earning an annual rate of return of 9%, in the thrid year how much interest would be earned?

Answer 1

Here, Compounding Principle will be used

• If deposit today is $3100

A = P (1 +r )ⁿ

where A = Amount / Worth of Deposit at the end of 30 years

P = Principal Deposited

r= rate of annual return

n = Number of Years

So, A = $3100 (1 + 0.07)³⁰

A = $3100 (1.07)³⁰

A = $3100 * 7.61226

A = $ 23598.006

Therefore the account would be worth $23598.006 in 30 years

• If the deposit is $5000 today % annual rate of interest is 9% then

Amount after 2 years = Principal (1 + 0.09 )²

Amount = $5000 (1.09)²

Amount = $5000 * 1.1881

Amount = $5940.5

Therefore , for third year

Interest = ($5940.5 * 9)/100

= $ 534.645

In the 3rd year, an interest of $534.645 would be earned