EXAMPLE 5 Find the balance in an account

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Presentation transcript:

EXAMPLE 5 Find the balance in an account You deposit $4000 in an account that pays 2.92% annual interest. Find the balance after 1 year if the interest is compounded with the given frequency. FINANCE a. Quarterly b. Daily

Find the balance in an account EXAMPLE 5 Find the balance in an account SOLUTION a. With interest compounded quarterly, the balance after 1 year is: A = P 1 + r n nt Write compound interest formula. = 4000 1 + 0.0292 4 4 1 P = 4000, r = 0.0292, n = 4, t = 1 = 4000(1.0073) 4 Simplify. = 4118.09 Use a calculator. ANSWER The balance at the end of 1 year is $4118.09.

Find the balance in an account EXAMPLE 5 Find the balance in an account b. With interest compounded daily, the balance after 1 year is: A = P 1 + r n nt Write compound interest formula. = 4000 1 + 0.0292 365 365 1 P = 4000, r = 0.0292, n = 365, t = 1 = 4000(1.00008) 365 Simplify. = 4118.52 Use a calculator. ANSWER The balance at the end of 1 year is $4118.52.

GUIDED PRACTICE for Example 5 6. FINANCE You deposit $2000 in an account that pays 4% annual interest. Find the balance after 3 years if the interest is compounded daily. a. With interest compounded daily, the balance after 3 years is: $2254.98 ANSWER