Question

Larry invests $100 in a savings plan. The plan pays 5 1/2% interest each year on

his $100 account balance. The following chart shows the balance on his account
after each year for the next 5 years. He did not make any deposits or
withdrawals during this time.

Answer 1

100*1.055^5 = $130.70

Explanation:

the simple way to work this out is to think about how much the savings increase by each year.

Balance * (1+interest)^years

So convert the interest rate to decimals and add it to one. This is the amount the balance is multiplied by each year. Raise it to the power of the years of interest and you get the result.

For 5 years it is

100*1.055^5 = $130.70