SOLUTION: A business invests $25,000 in an account that earns 5% interest compounded annually. What is the balance in the account after 2 years?

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Question 895973: A business invests $25,000 in an account that earns 5% interest compounded annually. What is the balance in the account after 2 years?
Answer by jim_thompson5910(35256) About Me  (Show Source):
You can put this solution on YOUR website!
We'll use the formula

A+=+P%2A%281%2Br%2Fn%29%5E%28n%2At%29

where

P = 25000 (the principal or initial balance)
r = 0.05 (interest rate as a decimal)
n = 1 (we're compounding 1 time per year)
t = 2 (for 2 years)

A+=+P%2A%281%2Br%2Fn%29%5E%28n%2At%29

A+=+25000%2A%281%2B0.05%2F1%29%5E%281%2A2%29 Plug in the given values (shown above)

A+=+25000%2A%281%2B0.05%29%5E%281%2A2%29

A+=+25000%2A%281.05%29%5E%281%2A2%29

A+=+25000%2A%281.05%29%5E%282%29

A+=+25000%2A%281.1025%29

A+=+27562.50


The balance of the account in two years is $27,562.50