Question

Roman saves $500 each year in an account earning interest at an annual rate of 4% compounded annually. How much interest will the account earn at the end of the first 2 years?

Answer 1

First what needs to be done is find out what 4% of $500 is, and add that to $500 to get how much money you would have after the first year.
4% of 500 would be 20, so you'd have $520 after the first year.
Now, find 4% of $520, for the second year. 4% of $520 would be 20.8, so add that and get $540.8.
Now for the last year, find 4% of $540.8.
That would be 21.632.
Round 21.632 to the nearest hundredth:
21.63
add that to $540.8: $562.43.