Question

Maggie has $2,674 in an account that earns 5% interest compounded annually.

To the nearest cent, how much interest will she earn in 2 years?

Answer 1

[AI-generated answer — Bot GPT 3.5]

To calculate the interest Maggie will earn in 2 years, we can use the formula for compound interest:

A = P(1 + r/n)^(nt)

Where:
A = the future value of the investment/loan, including interest
P = the principal investment/loan amount (the initial deposit or loan amount)
r = annual interest rate (decimal)
n = number of times that interest is compounded per year
t = number of years the money is invested or the loan is held for

P = $2,674
r = 5% or 0.05
n = 1 (compounded annually)
t = 2 years

Plugging the values into the formula, we get:

A = 2674(1 + 0.05/1)^(1*2)
A = 2674(1 + 0.05)^2
A = 2674(1.05)^2
A = 2674(1.1025)
A = $2945.21

To find the interest earned, we subtract the principal investment from the future value:

Interest = A - P
Interest = $2945.21 - $2674
Interest = $271.21

Therefore, to the nearest cent, Maggie will earn $271.21 in interest in 2 years.