Multiple choice

Markela opens a bank account that earns interest at a rate of 2% compounded annually. She puts $200 in the account when she opens it and does not make any more deposits into or withdrawals from the account for 2 years. If the amount of money in the account after 2 years is given by the expression 200(1.02)2 , which of the following expressions gives the amount of money in the account after 1 year?

  1. 100(1.02)

  2. 200(1.02)

  3. 100(1.02)2

  4. 200(1.02)2
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B Correct answer
Explanation

Compound interest formula is A = P(1+r)^t. For 2 years, it is 200(1.02)^2. For 1 year, it is simply 200(1.02)^1, which is 200(1.02).

AI explanation

Using the compound interest formula for amount, A = P(1 + R)^t, the amount after 2 years is given by the expression 200(1.02)^2. To find the amount after 1 year, we simply substitute t = 1 into the formula. This results in the expression 200(1.02). The result is 200(1.02).

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