Chapter SH, Problem 7.7.12EP

To determine

To calculate:To find the total amount to the nearest cent if the interest is compounded annually

Answer to Problem 7.7.12EP

Amount is $\$5392.19$

Explanation of Solution

Given information: $\$5075$ at $6.25\%$ for $1$ years

Formula used:

Compound interest formula is

  $A=P{\left(1+\frac{R}{100}\right)}^t$

Where,

  $A=$ Amount

  $P=$ Principal

  $R=$ Rate of Interest

  $T=$ Time in years

Calculation:

Given that $\$5075$ at $6.25\%$ for $1$ years

Thus,

  $\begin{array}{l}P=\$5075\\ R=6.25\%\\ T=1year\end{array}$

Amount is calculated using

  $A=P{\left(1+\frac{R}{100}\right)}^t$

Substituting the values,

  $\begin{array}{l}A=5075{\left(1+\frac{6.25}{100}\right)}^1\\ A=5075\left(1+0.0625\right)\\ A=5075\left(1.0625\right)\\ A=5392.1875\\ A=5392.19\end{array}$

Conclusion:

Hence, amount is $\$5392.19$