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