Question

shaq invested $350 in a savings account that earns 5% interest, compounded annually. How much interest will he earn in 2 years

Answer 1

$25.39

Explanation:

So if he has a 5% investment, then that means that every year he will get back 5% of the amount he invested.

So all one has to do is to find out 5% of the amount invested

Since it is asking for the amount earned in two years, then one will have to add back 5% twice

so 5% of 350

5% can be written as 0.05

so then the problem is

0.05 * 350

= 7.5

add that to the total amount and repeat the process

350 + 7.5

= 357.5

5% of 357.5

0.05 * 357.5

=17.885

because this is money one has to round to the second decimal point

= approx. 17.89

so now find the total amount earned by adding the two values

7.5 + 17.89

= 25.39