Answer:
Therefore, the answer is $72.45.
Step-by-step explanation:
To find the amount of interest Polly will earn in 2 years, we can use the formula for compound interest:
A = P(1 + r/n)^(nt)
where:
A = the total amount after t years
P = the principal amount (the initial amount invested)
r = the annual interest rate (as a decimal)
n = the number of times the interest is compounded per year
t = the number of years
In this case, we have:
P = $500
r = 7% or 0.07 (as a decimal)
n = 1 (compounded annually)
t = 2 years
Plugging these values into the formula, we get:
A = 500(1 + 0.07/1)^(1*2)
A = 500(1.07)^2
A = 500(1.1449)
A = $572.45 (rounded to the nearest cent)
To find the amount of interest, we subtract the initial principal amount from the total amount:
Interest = $572.45 - $500 = $72.45
Therefore, the answer is $72.45.