Final answer:
Using the formula for compound interest with a principal of $835 and a simple interest rate of 2 ¼%, the future value after 5 years would be $928.91.
Step-by-step explanation:
To determine how much money will be in the account after 5 years with a starting amount of $835 and an interest rate of 2 ¼%, we need to use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
- A represents the amount of money accumulated after n years, including interest.
- P is the principal amount (the initial amount of money).
- r is the annual interest rate (decimal).
- n is the number of times that interest is compounded per year.
- t is the time the money is invested for, in years.
In this case, since we're dealing with simple interest, the formula simplifies to:
A = P(1 + rt)
Converting 2 ¼% to its decimal form, we get 0.0225. Over 5 years, the total amount in the account will be:
A = $835(1 + 0.0225 × 5)
Calculating this, we get:
A = $835(1 + 0.1125)
A = $835 × 1.1125
A = $928.91
After 5 years, the account would have $928.91.