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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?
1 Answer
- B. BunneyLv 61 decade agoFavorite 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
