At the end of each year for 5 years, $500 is deposited into a credit union...

At the end of each year for 5 years, $500 is deposited into a credit union account. The credit union pays 5% interest compounded annually. At the end of 5 years, how much will be in the account?

Solutions

Expert Solution

Year	Principal	Interest	Final Amount
1	500.00	25.00	525.00
2	1,025.00	51.25	1,076.25
3	1,576.25	78.81	1,655.06
4	2,155.06	107.75	2,262.82
5	2,762.82	138.14	2,900.96

Given above is the table which calculates the total amount earned if $500 is deposited annually and money is compounded for 5 years.

1. The interest column simply calculates the interest at 5% of the principal. The first principal is the original money deposited, i.e. $500.

2. The final amount is calculated by adding principal and the interest.

3. Then the next years principal is calculated by adding the newly deposited $500 to the final amount of the last year.

4. By continuing these calculation for 5 years, we get $2900.96 at the end of the time period.

Rahul Sunny answered 2 years ago

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