a bank offers an investment account with an annual interest rate of 1.39% compounded annually. tony invests…

a bank offers an investment account with an annual interest rate of 1.39% compounded annually. tony invests $3300 into the account for 5 years. answer the questions below. do not round any intermediate computations, and round your final answers to the nearest cent. if necessary, refer to the list of financial formulas. (a) assuming no withdrawals are made, how much money is in tonys account after 5 years? (b) how much interest is earned on tonys investment after 5 years?

a bank offers an investment account with an annual interest rate of 1.39% compounded annually. tony invests $3300 into the account for 5 years. answer the questions below. do not round any intermediate computations, and round your final answers to the nearest cent. if necessary, refer to the list of financial formulas. (a) assuming no withdrawals are made, how much money is in tonys account after 5 years? (b) how much interest is earned on tonys investment after 5 years?

Answer

Explanation:

Step1: Recall compound - interest formula

The compound - interest formula when compounded annually is $A = P(1 + r)^t$, where $P$ is the principal amount, $r$ is the annual interest rate (in decimal form), and $t$ is the number of years. Here, $P=$3300$, $r = 0.0139$, and $t = 5$.

Step2: Calculate the amount in the account after 5 years

$A=3300\times(1 + 0.0139)^5=3300\times(1.0139)^5$. $(1.0139)^5=1.0139\times1.0139\times1.0139\times1.0139\times1.0139\approx1.07190135$. $A = 3300\times1.07190135\approx3537.274455\approx$3537.27$.

Step3: Calculate the interest earned

The interest earned $I$ is given by $I=A - P$. We know $A\approx3537.27$ and $P = 3300$. $I=3537.27-3300=$237.27$.

Answer:

(a) $$3537.27$ (b) $$237.27$