Q:

Jamal deposits $1000 into a savings account on his 18th birthday. If the 2% interest is compounded yearly, how much will he have in the account on his 65th birthday? Write your answer as a decimal rounded to the hundredths place. Do not include the dollar sign as part of your answer.

Accepted Solution

A:
The number of years (n) that the deposit stayed in his balance is given by: 65 - 18 = 47 years.

The future value (FV) of a deposit (P), deposited at an interest rate of r% compounded yearly for n years is given by

[tex]FV=P(1+r)^n[/tex]

Given that Jamal deposits P = $1000 into a savings account on for n = 47years at 2% interest compounded yearly, the amount in his bank account at the end of the period is given by

[tex]FV=1000(1+0.02)^{47} \\ \\ =1000(1.02)^{47}=1000(2.53634) \\ \\ =\$2,536.34[/tex]