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Popular Word Problems >

You deposit 500 in an account that pays 2.5% annual interest. Find the balance after 2 years when the interest is compounded daily. Round your answer to the nearest cent.

Solution

Y o u d e p os i t 500 in an a cco u n t t ha t p a ys 2.5% ann u a l in t eres t . F in d t h e ba l an ce a f t er 2 ye a rs w h e n t h e in t eres t i s co m p o u n d e d d ai l y . 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 .

Solution

Amount : 525.63

Solution steps

Translate the problem into an equation:

A = 500 (1 + \frac{0.025}{365})^{365 \cdot 2}

500 (1 + \frac{0.025}{365})^{365 \cdot 2} = 525.63464 \dots

Round to the nearest hundredth:

525.63

Amount : 525.63

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