Answer:
Explanation:
To find the third year value of the deposit, we can use the formula for compound interest:
A = P(1 + r/n)^(nt)
where A is the amount of money after t years, P is the principal (the initial deposit), r is the annual interest rate, n is the number of times the interest is compounded per year, and t is the number of years.
For the first year, we have:
P = $500
r = 0.05
n = 1 (compounded annually)
t = 1
So, the amount after the first year is:
A1 = $500(1 + 0.05/1)^(1*1) = $525
For the second year, we have:
P = $525 (the amount after the first year)
r = 0.06
n = 1
t = 1
So, the amount after the second year is:
A2 = $525(1 + 0.06/1)^(1*1) = $556.50
For the third year, we have:
P = $556.50 (the amount after the second year)
r = 0.07
n = 1
t = 1
So, the amount after the third year is:
A3 = $556.50(1 + 0.07/1)^(1*1) = $594.64
Therefore, the third year value of the deposit is $594.64.