Question

An employee put $5,000 in a retirement account that offers 9% interest compounded annually. The employee makes no additional deposits or withdrawals. How much interest will the employee have earned at the end of 5 years. Make sure to round your answer to the hundredths.

Answer 1

$2,693.12 will the employee have eared at the end of 5 years.

Explanation:

The formula of compound interest:

`A=P(1+r)^n`

`I` = A-P

A= The amount in the account after n years

P= Principal

r= rate of interest annually

n= time in years.

An employee put $5,000 in retirement account that offer 9% interest compounded annually.

Here P=$5,000, r=9%=0.09, n= 5 years

`A=5,000(1+0.09)^5`

=$7,693.12

The interest = A-P

=$(7,693.12-5,000)

=$2,693.12

$2,693.12 will the employee have eared at the end of 5 years.