Given an account with interest compounded annually, the formula `A=P(1+r)^(t)` can be used to calculate the total amount of money, A, in the account after t years, where P is the principal ( the amount originally invested) and r is the interest rate (expressed as a decimal). Suppose valeera invests $5,000 in a savings account that pays 2% interest compounded annually earn in four years? Express your answer to the nearest whole dollar.

Answer

A, B, D

Explanation

Difficult: Medium
Category: Passport to Advanced Math/ Exponents
Strategic Advice: Even though this question is wordly, if you read carefully you'll see that you're given a formula and the values of all the variables except the one you're looking for. This means you can simply plug in the values and simplify. Before filling in the grib, check that you answered the right question (how much interest was earned, not the total amount in the account).
Getting to the Answer: Jot down the formula `A=P(1+r)^(t)`, and then plug in the given values: `P=5,000, r=0.02, and t=4`, to find that `A=5,000(1+0.02)^(4)=5,413.16`. This is the total amount in the acocunt after 4 years. The initial amount was $5,000, so substract to find that Valeera will earn $5,412.16-$5,000=$412.16 or, rounded to the nearest whole dollar, $412 in interest.