Question

A principal of $500 is invested in an account at 7% per year compounded annually. What is the total amount of money in the account after 5 years?

Answer 1

`500(1+0.07/1) ^5 = 701`

Explanation:

The compound interest formula is below.

The principal is `$500`, the interest rate is `7%` expressed as `0.07` as a decimal. It is compounded annually (once a year) and it was compounded `5` times because it was compounded annually for `5` years.