How much interest can one earn on 5000 held for one year in a savings account?

Answer 1

Depends on the interest rate and how often it is compounded.

Ex. 1.00% interest compounded monthly

In one year, you would have $5,050.23

Ex. 1.00% interest compounded quarterly

In one year, you would have $5,050.19

This is called Future Value and is calculated by using the following formula:

Future Value = Present Value * (1 + rate)^time

Keep in mind, the compounding makes a difference, you can find out how your bank compounds by calling them or checking their website.

If its monthly, divide the rate by 12 (12 months). If its quarterly, divide the rate by 4 (4 quarters). Time should be the number of years multiplied by the same amount the rate is. In your case, time is 1 year * [12 months / 4 quarters / etc]. Also, keep in mind, the rate (percent) should be listed in decimal form, so 1% = 0.01

So in the case of 1% monthly, Future Value = $5,000 * (1 + 0.01/12)^1*12 = $5,000 * (1 + 0.0008)^12 = $5,000 * 1.01 = $5,050.23

May sound a bit complicated, so for a simple case like yours, you're better off using an on-line calculator. Just search for Future Value or FV caculator.