Justin invests $4,000 in a savings account for two years. The account pays 2% interest compounded annually. How much money will be in the account at the end of the second year?
A) $4,161.60
B) $4,160.00
C) $4,080.00
D) $1,161.60

Question

Quizplus · Accepted Answer

The amount of money in the account after two years can be calculated using the formula for compound interest: A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest, P is the principal amount ($4,000), r is the annual interest rate (2% or 0.02), n is the number of times that interest is compounded per year (1, since it's annually), and t is the time the money is invested for in years (2). Plugging in the numbers: A = $4,000(1 + 0.02/1)^(1*2) = $4,000(1.02)^2 = $4,000 * 1.0404 = $4,161.60.

Justin Invests $4,000 in a Savings Account for Two Years