# Can someone will give me a formula?

By succed

@succed (879)

United States

November 20, 2006 1:44pm CST

George puts $5,400 in a savings account at an annual interest rate of 6.5%. Approximately how much interest will the principal earn in 2 years?
The answer is $725 but do you come up with the result.

2 responses

@EagleEyes (646)

• United States

20 Nov 06

I think you take the $5,400 and times it by .065 and times that by 2. I got the answer is $702.00 not $725.00

@bam001 (941)

• United States

15 Dec 06

Does the problem say anything about compounding the interest? That will make a difference in the answer. If you compound annually, then you will get $724.82...which is very close to the $725.
A = 5400(1 + 0.65)^(2)
The formula is A = P(1 + r/n)^(nt)
P is the amount of deposit
r is the interest rate as a percent
n is the number of compounding periods in one year
t is the time in years.