You invested $2,000 at 5 percent compounded annually.Determine how much interest was earned in the fifth year.(Round your answer to two decimals.)
A) $100.00
B) $121.55
C) $500.00
D) $552.56

Question

Quizplus · Accepted Answer

To calculate the interest earned in the fifth year, we can use the formula:

Interest = Principal × (1 + rate)^n – Principal

where 
rate = 5% = 0.05 (as it is annual, we are calculating for one year) 
n = 5 (it is the number of years) 
Principal = $2,000

Now, we can substitute these values and solve:

Interest = $2,000 × (1 + 0.05)^5 – $2,000 
= $2,000 × 1.27628 – $2,000 
= $2,552.56 – $2,000 
= $552.56

So, the interest earned in the fifth year is $552.56. Therefore, the best choice is B.

You Invested $2,000 at 5 Percent Compounded Annually