Alec inherited some money from his grandfather and put it in a bank account that earns 10% interest compounded annually. After 5 years, Alec had 5,000.00 in the bank account. How much interest did he earn?Round your answer to the nearest cent.

Solution

A l ec inh er i t e d so m e m o n ey f ro m hi s g r an df a t h er an d p u t i t in a bank a cco u n t t ha t e a r n s 10% in t eres t co m p o u n d e d ann u a ll y . A f t er 5 ye a rs, A l ec ha d 5, 000.00 in t h e bank a cco u n t . Ho w m u c h in t eres t d i d h e e a r n ? R o u n d yo u r an s w er t o t h e n e a res t ce n t .

Interest : 1895.39

Solution steps

Translate the problem into an equation:

5000 = 3104.60661 \dots + I

Solve for

I, 5000 = 3104.60661 \dots + I : I = 1895.39

Interest : 1895.39