Jayden opened a savings account and deposited $500.00 as principal. The account earns 5% interest, compounded annually. What is the balance after 2 years?
Use the formula A=P1+
r
n
nt, where A is the balance (final amount), P is the principal (starting amount), r is the interest rate expressed as a decimal, n is the number of times per year that the interest is compounded, and t is the time in years.
Round your answer to the nearest cent
Using the given formula,
A = P(1 + r/n)^(nt)
where
P = $500.00 (principal)
r = 5% = 0.05 (interest rate expressed as a decimal)
n = 1 (number of times per year that the interest is compounded)
t = 2 (time in years)
A = 500(1 + 0.05/1)^(1*2)
A = 500(1 + 0.05)^2
A = 500(1.05)^2
A ≈ 500(1.1025)
A ≈ $551.25
The balance after 2 years is approximately $551.25.