Question

How much is in a saving account that started with $500 and earned 7.5% compound interest for 2 years

Answer 1

The saving account will have 575.125 USD after 2 years.

Explanation:

Usually, when people want to save money in a bank, they get a particular compound interest rate. This is of benefit for both sides, as the bank has the money at disposal and uses them, while the saver gets certain amount of money because of it. The interest rates can vary greatly, and in this case we have 7.5%, which is a very large interest rate in modern times.

If the saver has 500 USD at the beginning, and leaves the money in the bank for two years, he/she will get solid amount of compound interest for it. In order to get to the result we simply need to add 7.5% of the amount to it, and for the next year to add 7.5% on the amount that has accumulated from the previous year:

(500/100)x7.5 = 537.5

(537.5/100)x7.5 = 575.125

We get a result of 575.125, meaning that the saver has managed to gain 75.125 in the two years that the 500 USD have been in the bank.

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