**Simple interest** can be calculated using the formula below, where

*I* is the interest,

*P* is the

principal,

*r* is the interest rate, and

*t* is the time in years.

*I* = *Prt*

**Compound interest** can be calculated using the formula below, where

*A* is the

final amount,

*P* is the

principal,

*r* is the interest rate, and

*t* is the time in years.

*A* = *P*(1 + *r*)^{t}

Use the compound interest formula to find the amount of money after 5 years.

*A* | = | *P*(1 + *r*)^{t} |

| = | $1,200(1 + 0.04)^{5} |

| = | $1,200(1.04)^{5} |

| ≈ | $1,459.98 |