Edwin has $800 in a savings account that earns 8% interest, compounded annually. To the nearest cent, how interest will he earn in 1 year.

Formula for Compound Interest: A = P (1 + r/n) ^n*t

A = final amount (aka your answer)

P = initial amount (what you begin with)

r = interest rate (as a decimal)

n = number of times per year that the money is compounded

ex. annually: n = 1; semi-annually: n = 2; quarterly: n = 4

t = time in years

Explanation:

1. A = 800 (1 +.08/1) ^1

2. Because the interest rate is compounded only once a year, the problem becomes very simple and you can get rid of the exponent 1, as this will not affect the answer because any value to the power of 1 is itself. Additionally, you do not have to divide 0.08 by 1, because anything divided by 1 is itself as well.

3. A = 800 (1.08), multiply the values using a calculator for accurate answers

4. A = $864

Answer: Edwin will earn exactly $64 in one year with an 8% interest rate, giving him a total of $864