# 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 he have?

### 1 Answer | Add Yours

The man deposit $500. Interrest rate is 5%.

At the end of 1st year he will have 500*(1+5/100)

So at the start of second year he has 500*(1+5/100)

At the end of second year he will have 500*(1+5/100)*(1+5/100) or 500*(1+5/100)^2

So at the end of n years he will have 500*(1+5/100)^(n)

At the end 10 years money in the account = 500*(1+5/100)^10

= 814.45

**At the end of 10 years he will have $814.45 in his account.**

Note:

This is done in the fundamental way. There are equations to calculate the compount interest directly. It is shown below.

M = P (1+i)^n

M = final amount in the account after n years

P = Initial amount deposited in the account

i = compound interest rate per year

n = Duration in years

For our question;

P= 500

i = 5/100

n = 10

**M = 500*(1+5/100)^10 = $814.45**