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Morgan places $2,000 from her summer job in a savings account during her freshman year....

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rosey-girl | Student, Grade 12 | Valedictorian

Posted May 10, 2013 at 1:28 AM via web

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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?

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Mary Joy Ripalda | High School Teacher | (Level 3) Educator

Posted May 10, 2013 at 2:58 AM (Answer #1)

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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.

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