Question

John opened a savings account with an interest rate of 2.25%. If he deposited $80 in the account when he opened it and did not make any other deposits,

how much money was in the account after 5 years, rounded to the nearest cent?

Answer 1

To calculate the amount of money in the account after 5 years, we can use the formula for compound interest. Plugging in the numbers, the amount is approximately $89.29.

Step-by-step explanation:

To calculate the amount of money in the account after 5 years, we can use the formula for compound interest: A = P(1 + r)^n. Where:

• A is the future value of the account
• P is the initial deposit ($80)
• r is the interest rate per period (2.25% or 0.0225)
• n is the number of periods (5 years)

So, plugging in the numbers, we get:

A = 80(1 + 0.0225)^5
A = 80(1.0225)^5
A ≈ 80(1.1162)

Rounding to the nearest cent, the amount of money in the account after 5 years is approximately $89.29.