Question

If Oliver withdraws $285.10 from his savings account to make the purchase, how much would he have earned in interest on that amount over five months? Round your answer to the nearest cent.

Answer 1

Oliver withdraws an amount of $285.10 from his saving account

His saving account earns 1.8% annually

The interest Oliver could have earned in five months:

Monthly interest = Annual interest ÷ 12
Monthly interest = 1.8% ÷ 12
Monthly interest = 0.018 ÷ 12 = 3/2000

After five months = Principle × (1 + interest)ⁿ
After five months = 285.10 × (1 + 0.018)⁵
After five months = 311.70

Interest earned = 311.70 - 285.10 = $26.60