Question

You deposit $500 in an account that earns 5% compounded annually. What is the balance in your account after 5 years? Round your answer to the nearest cent.
F $2,625.00
G $625.00
H $886.89
J $638.14

Answer 1

Answer:

J. $638.14

Step-by-step explanation:

We will use compound interest formula to solve our given problem.

$A=P(1+\frac{r}{n})^{nT}$, where,

A=Final amount after T years.

P= Principal amount.

r= Interest rate in decimal form.

n= Period of compounding.

T= Time in years.

Let us convert our given interest rate in decimal form.

$5\%=\frac{5}{100}=0.05$

Let us substitute our given values in above formula.

$A=500*(1+\frac{0.05}{1})^{1*5}$

$A=500*(1+0.05)^{5}$

$A=500*(1.05)^{5}$

$A=500*1.2762815625$

$A=638.14078125\approx 638.14$

Therefore, we will have an amount of $638.14 after 5 years and option J is the correct choice.