A person deposited $500 in a savings account that pays 5% annual interest that is compounded yearly. At the end of 10 years how much money will be in the savings?
An amount P deposited in an account that gives an annual rate of interest r, compounded annually after n years is given by P*(1 + r)^n
Here, P = $500, r = 0.05 and n = 10
The money in the savings account after 10 years is $500*(1.05)^10 = $814.44
At the end of 10 years there are $814.44 in the savings account.