Answer:
Answer: $607.75
Step-by-step explanation:
Answer:
$607.75
Step-by-step explanation:
As a first approximation, compound interest will be slightly higher than simple interest for a relatively short time period. Here simple interest at 5% for 4 years will add 4×5% = 20% to the value, adding about $100 to the initial $500 value. That is, we expect the value in 4 years to be slightly more than $600.
The appropriate answer choice is $607.75.
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The actual amount can be calculated using the multiplier 1.05 for each of the 4 years, or 1.05^4 ≈ 1.21550625 for the entire period. Then the predicted item value is ...
$500 × 1.21550625 = $607.753125 ≈ $607.75