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Darrell has $4,873 in an account that earns 5% interest compounded annually.

To the nearest cent, how much interest will he earn in 2 years?

User Huzzah
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1 Answer

3 votes

Answer:

  • Darrell will earn $499.48

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Use the formula for compound interest:


  • A = P(1 + r/n)^(nt)

where,

  • A = the future amount,
  • P = $4873, the initial amount,
  • r = 5% = 0.05, the annual interest rate,
  • n = 1, the number of compounds per year,
  • t = 2, the time in years.

Plugging in the values given, we get:


  • A = 4873(1 + 0.05/1)^(1\cdot2) = 4873(1.05)^2 = 5372.48

To find the interest earned, subtract the principal from this amount:

  • Interest = 5372.48 - 4873 = 499.48
User Bravenewweb
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