Answer:
The balance after 2 years when the interest is compounded daily is approximately $526.32
Explanation:
To solve this problem, we can use the formula for compound interest:
A = P(1 + r/n)^(nt)
where A is the final balance, P is the initial principal, r is the annual interest rate (as a decimal), n is the number of times the interest is compounded per year, and t is the number of years.
In this case, we have:
P = $500 (the initial deposit)
r = 2.5% = 0.025 (the annual interest rate)
n = 365 (since interest is compounded daily)
t = 2 (since we want to find the balance after 2 years)
Substituting these values into the formula, we get:
A = 500(1 + 0.025/365)^(365*2)
≈ $526.32
Therefore, the balance after 2 years when the interest is compounded daily is approximately $526.32.