An employee put $5,000 in a retirement account that offers 9% interest compounded annually. The employee makes no additional deposits or withdrawals. How much interest will the employee have earned at the end of 5 years. Make sure to round your answer to the hundredths.
Mathematics · Middle School · Thu Feb 04 2021
Answered on
Given:
Principal Amount ( P ) = $5,000
Interes Rate ( r ) = 9% or 0.09 ( divide by 100)
Term ( t ) = 5
Compounded annually ( n ) = 1
Formula for Compound Interest:
A = P ( 1 + r/n)^nt
A = Future value
Solution:
Substitute the given values of P, r, n and t to the formula for the compound interest.
A = $5,000 ( 1 + 0.09/1)^(5)(1)
A = $5,000 ( 1 + 0.09)^(5)
A = $5,000 ( 1.09)^(5)
A = $5,000 ( 1.538623955 )
A = $7,693.12
Final answer:
A = $7,693.12