Answer: Compound interest is $36.61
Explanation:
Initial amount deposited into the account is $500 This means that the principal,
P = 500
It was compounded annually. This means that it was compounded once in a year. So
n = 1
The rate at which the principal was compounded is 3.5%. So
r = 3.5/100 = 0.035
It was compounded for 2 years. So
t = 2
The formula for compound interest is
A = P(1+r/n)^nt
A = total amount in the account at the end of t years. Therefore
A = 500 (1+0.035/1)^1×2
A = 500(1.035)^2 = $535.61
Compound interest = 535.6 - 500 = $35.61