The expression below can be used to calculate the balance in a savings account for which an initial deposit of P dollars has been compounded each year for t years at interest rate r.
A=P(1+r)ᵗ
Miguel opened a savings account with a deposit of $1000. The interest is compounded each year at a rate of 2%.
1. What will be the balance in Miguel's account at the end of 1 year?
2. What will be the balance in Miguel's account at the end of 4 years?
Tim opened a savings account with a deposit of $800. The interest is compounded each year at a rate of 2.5%.
3. Will Miguel or Tim have earned more interest at the end of 4 years?