# Morgan places \$2,000 from her summer job in a savings account during her freshman year. The account pays 5.5% interest compounded annually. If she leaves the money in the account untouched, how...

Morgan places \$2,000 from her summer job in a savings account during her freshman year. The account pays 5.5% interest compounded annually. If she leaves the money in the account untouched, how much money will she have after 4 years?

lemjay | High School Teacher | (Level 2) Senior Educator

Posted on

To solve, apply the compound interest formula which is:

`A=P(1+r/n)^(nt)`

where
A - accumulated amount for t years
P - principal amount
r - annual rate of interest
n - number of times the interest is compounded per year, and
t - number of years

Since the given interest is 5.5% compounded annually, the values of r and n are 0.055 and 1, respectively.

So, plug-in the values P=2000, r=0.055, n=1 and t=4 to the formula.

`A=2000(1+0.055/1)^(1*4)=2000(1.055)^4`

`A=2477.65`

Hence, after 4 years, Morgan will have \$2477.65 in her account.