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Shelby has $20 in a savings account that earns 5% interest, compounded annually. To the nearest cent, how much will she have in 2 years?

$____

1 Answer

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Answer: she have $22.05 in 2 years

Explanation:

We would apply the formula for determining compound interest which is expressed as

A = P(1+r/n)^nt

Where

A = total amount in the account at the end of t years

r represents the interest rate.

n represents the periodic interval at which it was compounded.

P represents the principal or initial amount deposited

From the information given,

P = 20

r = 5% = 5/100 = 0.05

n = 1 because it was compounded once in a year.

t = 2 years

Therefore,

A = 20(1+0.05/1)^1 × 2

A = 20(1.05)^2

A = 22.05