Billy deposited $5,000 in an account earning 1% interest compounded annually.
To the nearest cent, how much interest will he earn in 1 year?
The interest earned can be calculated using the formula:
Interest = Principal * (1 + Rate)^Time - Principal
where:
Principal = $5,000
Rate = 1% or 0.01
Time = 1 year
Using these values in the formula, we have:
Interest = $5,000 * (1 + 0.01)^1 - $5,000
Interest = $5,000 * (1.01) - $5,000
Interest = $5,050 - $5,000
Simplifying, we have:
Interest = $50
Therefore, Billy will earn $50 in interest in 1 year.