Your parents put $500 into an account paying 7 percent interest for you when you were ten. Ten years later they tell you that you can take the money out of the account. What is the balance to the nearest penny?
983.58
To calculate the balance of the account after ten years, we need to use the compound interest formula:
A = P(1 + r/n)^(nt)
Where:
A = the final amount (balance) in the account
P = the principal amount (initial deposit)
r = annual interest rate (as a decimal)
n = number of times interest is compounded per year
t = number of years
In this case, the initial deposit (principal) is $500, the annual interest rate is 7% (or 0.07 as a decimal), and the money was left in the account for ten years.
Let's plug these values into the formula and calculate the balance:
A = 500(1 + 0.07/1)^(1*10)
A = 500(1.07)^10
Using a calculator, we can find that (1.07)^10 is approximately 1.967151. Therefore, the balance in the account after ten years would be:
A = 500 * 1.967151
A ≈ $985.58
Rounding to the nearest penny, the balance in the account would be approximately $985.58.