Question

Suppose you have $100 in a saving account earning 2 percent interest a year.after five year how much would you have

Answer 1

Answer: Roughly $110.40

Explanation:

100 x (1.02)^5

The 1.02 is just 100 percent of the number plus the 2 percent interest you make.

Answer 2

Answer:

$110.41

Explanation:

Provided that the interest is a "compounding interest," you will have $110.41 in 5 years. A compounding interest allows you to calculate the interest you can earn on your accumulated interest over time in addition to your deposit.

Let's calculate the interest on a yearly basis.

1. First year = $100 x 20% (0.02) = $2

You have to add $2 to the initial deposit of $100.

• $100 + $2 = $102

2. Second year = $102 x 20% (0.02) = $2.04

• $102 + $2.04 = $104.04

3. Third year = $104.04 x 20% (0.02) = $2.0808

• 104.04 + $2.0808 = $106.1208

4. Fourth year = $106.1208 x 20% (0.02) = $2.122416

• $106.1208 + $2.122416 = $108.243216

5. Fifth year = $108.243216 x 20% (0.02) = $2.16486432

• $108.243216 + $2.16486432 = $110.408 or $110.41

After five years, you will have $110.41.