Question

How much would $500 invested at 7% interest compounded annually be worth after 4 years? Round your answer to the nearest cent

Answer 1

Answer: $655.40

Step-by-step explanation:

Given : Principal amount = $500

The rate of interest  compounded annually  =7%=0.07

Time = 4 years

We know that compound amount after n years is given by :

$A=P(1+r)^n$

Thus for the given situation , the compounded  amount after 4 years will be :-

$\\\Rightarrow\ A=500(1+0.07)^4\\\Rightarrow\ A=500(1.07)^4\\\Rightarrow\ A=\ 655.398005\approx\ 655.40........\text{to the nearest cent.}$

Answer 2

If 7% interest is compounded annually, then the value of the $500
after 'Y' years in the future is
                                                         $500 (1.07)^to the 'y' power .

For this exercise, it's    $500 (1.07)⁴ =  $ 655.40 .