Question

Bryan invests $500 in an account earning 4% interest that compounds annually. If he makes no additional deposits or withdrawals, how much will be in the account: How much will be in the account after 25 years using simple interest?

Answer 1

As the question is not clear about the calculation needed, so i will calculate in both ways - compound interest and simple interest.

Given are:

Amount = $500

Rate of interest = 4% or 0.04

Time = 25

n = 1(compounded annually)

Formula for compound interest :

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

Putting values in the formula:

A= $500(1+\frac{0.04}{1})^{25}$

= $500(1.04)^{25}$

= 500*2.665 = $ 1332.50

Hence, amount in the account after 25 years = 500+1332.50= $1832.50

Formula for simple interest:

S.I.=$\frac{p*r*t}{100}$

= $\frac{500*4*25}{100}$

Interest = 500

Hence, amount in the account after 25 years = 500+500 = $1000