Chapter 7.7, Problem 7E

To determine

To calculate: the balance of the account after $4\text{years}$ .

Answer to Problem 7E

The balance of the account after $\text{4}\text{years}$ is $\$800$ (nearest cent)

Explanation of Solution

Given information: deposited $P=\$700$ into a saving account that earns $r=2\%$ interest compounded annually up to $\text{4}\text{years}$

Concept Used:

Compound interest problem requires the use of the following formula:

  $A=P{(1+\frac{r}{n})}^{nt}$

Calculation:

As per the given problem

  $P=\$700,t=4\text{years},r\text{=2\%}\text{and as interest compounded annually }n=1$

Substitute the values in the formula

  $\begin{array}{l}A=P{(}^1\\ \Rightarrow A=700{(}^1\\ \Rightarrow A=700{(}^{1.02}\\ \Rightarrow A=757.702512\end{array}$

In nearest cent $A=\$800$

The balance of the account after $\text{4}\text{years}$ is $\$800$ (nearest cent)

Conclusion:

The balance of the account after $\text{4}\text{years}$ is $\$800$ (nearest cent)