Chapter 7.7, Problem 5P

Find the balance in each account after the given period.

$8000 principal earning 5% compounded annually, after 6 yr

To determine

To find the account balance after $6years$ if the principal amount $8000\$$ earning $5\%$ compounded annually.

Answer to Problem 5P

The account balance after $6years$ is $10720.77\$$

Explanation of Solution

Given information :

Given principal amount $8000\$$ earning $5\%$ compounded annually.

As we have compound interest formula $A=P{\left(1+\frac{r}{n}\right)}^{nt}$

Where $P=\text{Principal}\text{amount}=8000\$$ , $r=\text{compound}\text{interset}=5\%,$

  $t=time=6years$ and $n=\text{number}\text{of}\text{times}\text{interest }\text{is}\text{comounded in}\text{a}\text{year}\text{=1}$

  $\begin{array}{l} \text{Thus,}A=P{\left(1+\frac{r}{n}\right)}^{nt}\\ \Rightarrow A=8000{\left(1+\frac{5}{100}\right)}^6\\ =8000{\left(1.05\right)}^6\\ =8000(1.34)\\ \therefore A=10720.77\end{array}$

Hence, the account balance after $6years$ is $10720.77\$$