sarah_98
ryan puts $500 into a bank account. the bank pays 5% compound interest per year. how much is the interest after one year?



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ParthKohli
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Continuous compounding.
\( \color{Black}{\Rightarrow 500(1 + 0.05) \large^n }\)

ParthKohli
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\(n\textbf{ is the number of years.}\)

sarah_98
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ok

ParthKohli
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\( \color{Black}{\Rightarrow 500(1.05)^1 }\)
\( \color{Black}{\Rightarrow 500 \times 1.05 }\)

sarah_98
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$525?

sarah_98
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is it?

ParthKohli
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This is compounded interest.

sarah_98
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im confused :s

ParthKohli
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And yes it is $525 :)

sarah_98
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oh ok there's part 2

ZhangYan
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lol sorry parth read mistake ;)

ParthKohli
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Interest = Amount  Principal
Interest = 525  500
Interest = 25

sarah_98
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work out the total amount he has in his bank account after 2 yrs

ParthKohli
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@ZhangYan if it's one year then both simple and compound may apply :) so your answer is correct but not the method :S

sarah_98
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work out the total amount he has in his bank account after 2 yrs