Question

Dina invests $600 for 5 years at a rate of 2% per year compound interest.

Answer 1

Answer:

The value of this investment at the end of the 5 years is of $662.5.

Step-by-step explanation:

Compound interest:

The compound interest formula is given by:

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

Where A(t) is the amount of money after t years, P is the principal(the initial sum of money), r is the interest rate(as a decimal value), n is the number of times that interest is compounded per year and t is the time in years for which the money is invested or borrowed.

Dina invests $600 for 5 years at a rate of 2% per year compound interest.

This means that $P = 600, t = 5, r = 0.02, n = 1$. Thus

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

$A(t) = 600(1 + \frac{0.02}{1})^{t}$

$A(t) = 600(1.02)^t$

Calculate the value of this investment at the end of the 5 years.

This is A(5). So

$A(5) = 600(1.02)^5 = 662.5$

The value of this investment at the end of the 5 years is of $662.5.