Question

An employee puts 500000 in a retirement account that offers 9% interest compounded anually.The employee makes no additional deposits or withdrawals.Which amount id the closest to the interest the employee will have earned at the end of 5 years?

Answer 1

The interest earned by the employee at the end of 5 years will be approximately $315,236.

Explanation:

We can use the formula for compound interest to find the interest earned by the employee at the end of 5 years:

A = P(1 + r/n)^(nt)

where A is the amount at the end of the time period, P is the principal (initial amount), r is the interest rate (as a decimal), n is the number of times the interest is compounded per year, and t is the time period in years.

In this case, P = $500,000, r = 0.09, n = 1 (compounded annually), and t = 5. Substituting these values into the formula, we get:

A = 500000(1 + 0.09/1)^(1*5)

= 500000(1.09)^5

= $815,236.53

Therefore, the interest earned by the employee at the end of 5 years is approximately $815,236.53 - $500,000 = $315,236.53, which is closest to $315,236.