Question

Ryan invests $500 today in an account earning 4%. How much will it be worth in 5 years? (Compound interests formula, n=1)

Answer 1

$608

Explanation:

To find the amount that the investment will be worth in 5 years, you have to use the following formula:

FV= PV*(1+(r/n))^nt

FV= Final value

PV= Present value= $500

r= interest rate= 4% (0.04)

n= number of times that the interest is applied in a period= 1

t= number of time periods= 5

FV= 500*((1+(0.04/1))^(1*5)

FV= 500*(1.04)^5

FV= 500*1.216

FV= 608

The answer is that it will be worth $608 in 5 years.