# Real World Applications - Interest

A person deposited \$500. in a savings account that pays 5% annual interest that is compouded yaerly. At the end of 10 years,how muchmoney will be in the savings account?

### Comments for Real World Applications - Interest

 Feb 05, 2012 Interest Calculations by: Staff Question: A person deposited \$500. in a savings account that pays 5% annual interest that is compouded yaerly. At the end of 10 years,how muchmoney will be in the savings account? Answer: principal \$500, rate 5% compounded annually, time 10 years A = P*(1 + r)^t A = final balance of the investment at the end of 10 years P = principle (the initial investment) r = decimal form of annual interest rate t = time in years (number of 12 month periods) P = \$500 t = 10 years (note: if the time period were in quarters t = 4 quarters per year x 10 years = 40 quarters) r = 0.05 (.05 is the decimal form of 5%. It is = 5÷100. r = the interest rate per time period (annually in this case): .05/1 = 0.05 [note: if the interest were compounded quarterly r = .05/4; if the interest were compounded monthly r = .05/12; etc. ) A = P*(1 + r)^t A (at 10 years) = 500*(1 + 0.05)^10 A (at 10 years) = 500*(1.05)^10 A (at 10 years) = 500*(1.62889462678) A (balance at 10 years) = 814.45 >>>The final answer is: A (balance at the end of 10 years) = \$814.45 Thanks for writing. Staff www.solving-math-problems.com