Question

Edgar has $30 in an account that earns 5% interest compounded annually.
To the nearest cent, how much interest will he earn in 2 years?
Use the formula B=p(1+r)t, where B is the balance (final amount), p is the principal (starting amount), r is the interest rate expressed as a decimal, and t is the time in years.
$

Answer 1

B = 30(1.05)^2 = 30(1.1025) = 33.075.
Interest = 33.075 − 30 = 3.075 → $3.08 (to the nearest cent).