Question

What is the total interest earned in two years on an account containing $500 at 3.5% interest, compounded annually?

Answer 1

Answer: $35.6125

Explanation:

3.5% = 0.035

Let's find the deposit amount with interest at the end of the first year:

500 + 500 · 0.035 = 517.5

Let's find the amount of the deposit with interest at the end of the second year:

517.5 + 517.5 · 0.035 = 535.6125

Find the total interest earned over two years:

535.6125 - 500 = 35.6125