josie has $4,000 in an account that earns 5% interest compounded annually. to the nearest cent, how much…
josie has $4,000 in an account that earns 5% interest compounded annually. to the nearest cent, how much interest will she earn in 1 year? $
Answer
Explanation:
Step1: Identify the interest - formula
The simple - interest formula for annual compounding in the first year is $I = P\times r$, where $P$ is the principal amount and $r$ is the annual interest rate.
Step2: Convert the percentage to a decimal
The annual interest rate $r = 5%=0.05$, and the principal amount $P = 4000$.
Step3: Calculate the interest
$I=P\times r=4000\times0.05 = 200$.
Answer:
$200.00$