# Compound interest function

#### Question Q2.7.2

The following code snippet attempts to calculate the balance of a savings account with an annual interest rate of 5% after 4 years, if it starts with a balance of $100. >>> balance = 100 >>> def add_interest(balance, rate): ... balance += balance * rate / 100 ... >>> for year in range(4): ... add_interest(balance, 5) ... print('Balance after year {}:${:.2f}'.format(year+1, balance))
...
Balance after year 1: $100.00 Balance after year 2:$100.00
Balance after year 3: $100.00 Balance after year 4:$100.00


Explain why this doesn't work and provide a working alternative.