Im lost and cant understand this .?
Mary just deposited $33,000 in an account paying 7% interest. She plans to leave the money in this account for eight years. How much will she have in the account at the end of the seventh year?
Mary just deposited $33,000 in an account paying 7% interest. She plans to leave the money in this account for eight years. How much will she have in the account at the end of the seventh year?
B. Bunney
Favorite Answer
you need to calculate the effect of compound interest, which is interest on interest.
So year one Mary will have the $33,000 plus the 7% so 33,000x1.07 or $35,310. However, if she leaves it in then the 7% interest is now calculated on the new higher amount so 35,310x1.07 which is 37,781.70, the next year its 37,781.70z1.07 etc until the end of 8 years. Earning interest on the interest of the prior year is called compounding