Question

How much would $200 invested at 7% interest compounded annually be worth after 5 years? Round your answer to the nearest cent.

Answer 1

Use the Compound Amount formula:

A = P (1 + r)^t, where P is the principal, r is the interest rate as a decimal fraction, and t is the number of years.

Here, A = $200 (1 + 0.07)^5    =    $500(1.07)^5    =   $280.51.

The interest earned would be $80.51.