Question

Suppose your friend's parents invest $20000 in an account paying 7% compounded annually. What will the balance be in 7 years

Answer 1

The balance will be: $500,637.91

Answer 2

The formula for compound interest is:

$I = P(1 + \frac{r}{n} ) ^{nt}$

Where P is the amount you start with, r is the rate, t is the time, and n is the number of times the interest is calculated per year. So for you, this would look like:

$I = 20000(1 + \frac{0.05}{1}) ^{1*7}$

Hope it helps!