Question

An employee put $5,000.00 in a retirement account that offers 9% interest compounded annually. The employee makes no additional deposits or withdrawals. Which amount is closest to the interest the employee will have earned at the end of 5 years? A) $229.09 B) $450.00 C) $2,250.00 D) $2,693.12

Answer 1

The interest the employee will have earned at the end of 5 years is $ 2693.12 .

Option (D) is correct.

Explanation:

Formula

`Amount = P(1 + r)^(t)`

Where P is the principle , r is the rate of interest in the decimal form and t is the time .

As given

An employee put $5,000.00 in a retirement account that offers 9% interest compounded annually for 5 years .

P = $ 5000

9% is written in the decimal form.

`= (9)/(100)`

= 0.09

r = 0.09

t = 5 years

Putting all the values in the formula

`Amount = 5000(1 +0.09)^(5)`

`Amount = 5000(1.09)^(5)`

`Amount= 5000* 1.53862 (Approx)`

Amount = $7693.12

As

Amount = Principle + Interest

Putting all the values in the above

$7693.12 =$5000 + Interest

Interest = $7693.12 - $5000

= $ 2693.12

Therefore the interest the employee will have earned at the end of 5 years is $ 2693.12 .

Option (D) is correct.