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Calculating Compound Interest on a Savings Account Over Three Years

In this mathematical presentation, we explore how Robert invests $5,000 in a savings account with a 3.75% interest rate, compounded annually. We calculate the amount in the account after three years without any additional deposits or withdrawals. Through a step-by-step breakdown, we compute the interest earned each year, finally totaling $5,583.86 after three years. This example illustrates the power of compound interest and helps understand financial growth over time.

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Calculating Compound Interest on a Savings Account Over Three Years

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  1. Andrew Williams Mathematical Presentation

  2. My Problem A bank is advertising the new costumers can open a savings account with a 3 3/4% interest rate compounded annually. Robert invests $5,000 in an account at this rate. If he makes no additional deposits or withdrawals on his account, find the amount, find the amount of money he will have, to the nearest cent, after three years.

  3. Solving 1 first I will take $5000 times .0375 to receive the interest amount. I then get $187.5 I add that to the original $5000. I will repeat this process two more times and it will look like this. Step 1. $5000 x .0375=187.5. Step 2 $187.5+$5000=$5187.5 Step 3 $5187.5 x .0375=194.53125. Step 4 $5187.5+$194.53125= $5382.03125. Step 5 5382.03125 x .0375=$201.8261719. Step6 $5382.03125+$201.8261719=$5583.857422.

  4. Finish Final result is $5583.857422 Round to nearest cent $5583.86

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