Read this lesson’s Math Notes box about compound interest, and then answer the questions below. 

1. What does the $\left(1 + r\right)$ represent in the formula? Why are the two quantities added together?

   Hint (a):

   Multiplying the principal amount by 1 results in the original amount. Multiplying the principal by the interest rate results in the amount gained from interest.

   Partial Answer (a):

   These values are added to calculate the percent based on the previous balance, not just the principal.

2. If Melanie invests $$2500$ at a $3\%$ interest rate compounded annually, how much will she have at the end of four years?