Question

Molly opened a savings account with a one‐time deposit of $100 that will be left in the account for at least 5 years. The savings account will pay 5% compounded annually. What is the amount of interest she will earn after 5 years.

Answer 1

The amount of interest Molly will earn after 5 years on a deposit of $\ 100$ compounded annually over 5 years is $\ 27.63$

First, we need to find the future value of her investment, then we subtract the original deposit from it to get the amount of interest she will get at the end of 5 years.

The future value of an investment that is compounded annually is given by

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

where

$A=\text{Amount of money in Molly's account after 5 years}\\P=\text{Molly's initial deposit into her account}=\ 500\\r=\text{The annual interest rate as a decimal}=0.05\\t=\text{The time the money is invested (in years)}=5$

Substituting the available values into the formula and solving

$A=100(1+0.05)^5=100(1.05)^5 \approx \ 127.63$

The interest Molly will earn after 5 years is

$A-P=\ 127.63-\ 100=\ 27.63$

Therefore, the amount of interest Molly will earn after 5 years on a deposit of $\ 100$ compounded annually over 5 years is $\ 27.63$

Learn more about compound interest here: brainly.com/question/21270833