Mrs. Huffman deposited $500 into a savings account, which earns (grows) 2.5% annual interest. If she does not make any deposits or withdrawals, how much will her investment be worth in 5 years?

Answer 1

Solution

i = interest rate = 2.5 % = 0.025, n = number of years = 5

F is future worth, and P is present worth = $500

F = P(1+i)ⁿ

F = $500( 1 + 0.025 )⁵ = $565.7

Her investment will be worth $565.7 in 5 years