Final answer:
To calculate the future value of a $2,000 deposit at 6% interest annually over 5 years, use the compound interest formula, resulting in $2676.45 after 5 years.
Step-by-step explanation:
If you deposit $2,000 in an account that pays 6% interest annually, to find how much will be in your account after 5 years, you need to use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
- A is the amount of money accumulated after n years, including interest.
- P is the principal amount (the initial amount of money).
- r is the annual interest rate (decimal).
- n is the number of times that interest is compounded per year.
- t is the time the money is invested for, in years.
In this case, the principal amount P is $2,000, the annual interest rate r is 6%, or 0.06, the interest is compounded once a year so n is 1, and the time t is 5 years.
A = 2000(1 + 0.06/1)^(1*5)
A = 2000(1 + 0.06)^5
A = 2000(1.06)^5
A = 2000 * 1.3382255776
A = $2676.45
Therefore, after 5 years, your account will have $2676.45.