At the beginning of year 1, Zack invests $700 at an annual compound interest
rate of 3%. He makes no deposits to or withdrawals from the account.
Which explicit formula can be used to find the account's balance at the beginning of year 5? What is the balance?

A. A(n) = 700 + (n - 1)(0.03 • 700); $784.00

B. A(n) = 700 + (0.003 • 700)^(n - 1); $719.45

C. A(n) = 700 • (1 + 0.03)^(n - 1); $787.86

D. A(n) = 700 • (1 + 0.03)^n; $811.49

If the initial amount (also called as principal amount) is P, and the interest rate is R% per unit time, and it is left for T unit of time for that compound interest,

then the interest amount earned is given by:

[tex]CI = P\left(1 +\dfrac{R}{100}\right)^T - P[/tex]

The final amount becomes:

[tex]A = CI + P\\A = P\left(1 +\dfrac{R}{100}\right)^T[/tex]

The formula will become

A (n) = 700 • (1 + 0.03)^(n – 1)

Where n = 5 years

A (5) = 700 • (1 + 0.03)^(5 – 1)

A (5) = 700 • (1 + 0.03)^(4)

Thus, the account balance at the beginning of 5 years or at the end of 4 years;

A (5)=700×(1+0.03)^(4)

A (5)=787.8

Hence, The answer is C. A(n) = 700 • (1 + 0.03)^(n - 1); $787.86.

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