Question

If $1,000 is invested in an account that pays 5% interest compound annually, an expression that represents the amount in the account at end of 5 years can be given by which of the following equations?

a. 1000(1.05)^5
b. 1000(0.5)^5
c. 1000+(0.5)^5

Answer 1

Express 0.5 as a fraction.

A)

5

1000

B)

5

100

C) cg

5

10

D)

5

1

Explanation:

Answer 2

Hello! So the formula for compound interest is P(1 + r)^t, where r = rate, P = principal, and t = time (years). C is out, because you multiply the rate and principal together to get the price, not add. You raise the decimal to a certain power, based on the amount of years. You add 1 to the rate. 5% in decimal form is 0.05 and you must add 1 to the amount, which eliminated B. The only answer that works is A, because it shows the correct formula. The answer is A.