Question

enter the correct answer.
if $2,000 are deposited into a college fund with a 5% interest rate, compounded annually, how much will be in the fund after 5 years?
annual compound interest formula
a = p(1 + r)^t
a = $?

Explanation:

Step1: Identify the values

We know that the principal amount \( P = 2000 \), the annual interest rate \( r = 5\%=0.05 \), and the time \( t = 5 \) years.

Step2: Apply the compound interest formula

The formula for annual compound interest is \( A = P(1 + r)^t \). Substitute the values of \( P \), \( r \), and \( t \) into the formula:
\( A = 2000(1 + 0.05)^5 \)
First, calculate \( 1 + 0.05 = 1.05 \). Then, calculate \( 1.05^5 \approx 1.27628 \).
Now, multiply this by the principal amount: \( A = 2000\times1.27628 = 2552.56 \)

Answer:

\( 2552.56 \)