Question

Sierra wants to invest $5,000 at her local bank. She will receive an interest rate of 1%, compounded annually. What is the value of her investment after two years?

Answer 1

Value of investment for Sierra after two years will be $5100.5

Explanation:

Principal Amount P =$5000

Interest rate r = 1% = 0.01

Time t = 2 years

Compounded annually n = 1

We need to find future amount A

The formula used is:
`A=P(1+(r)/(n))^(nt)`

Putting values and finding A

`A=P(1+(r)/(n))^(nt)\\A=5000(1+(0.01)/(1))^(1*2)\\A=5000(1+0.01)^(2) \\A=5000(1.01)^(2)\\A=5000(1.0201)\\A=5100.5`

So, Value of investment for Sierra after two years will be $5100.5