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?
To solve, apply the compound interest formula which is:
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.
Hence, after 4 years, Morgan will have $2477.65 in her account.