Compute the amount of the fund after the 1st year:
Compute the amount of the fund after the 2nd year:
Amount of fund:
7402.50 (1.0575) = 7828.14
The amount of the retirement fund after 2 years is $7,828.14
TIP: For computing the fund involving a higher number of years, such as 20 years, you cannot use this method because it will be very time-consuming. Instead, use the formula:
where A stands for the final amount, P stands for principal (or initial amount), r is the rate (as a percent), and t is time (in years).
Amount of fund in 20 years: