Question

Kenny has $500 in an account. The interest rate is 5% compounded annually.To the nearest cent, how much interest will he earn in 1 year?Use the formula B=p(1+r)t, where B is the balance (final amount), p is the principal (starting amount), r is the interest rate expressed as a decimal, and t is the time in years.

Answer 1

Using the formula;

`B=p(1+r)^t`

Where;

`\begin{gathered} p=500,r=5\text{ \%}=0.05,t=1 \\ \\ B=500(1+0.05)^1 \\ \\ B=525 \end{gathered}`

CORRECT ANSWER: $525