Question

Sergio has decided to diversify his investments in the following way: $4,000 in an account earning 3.2% simple interest $4,000 in a savings account earning 2.1% interest compounded annually $7,500 in a certificate of deposit earning 5% interest compounded quarterly. How much total interest will Sergio earn on his investments at the end of 4 years?

Answer 1

The total interest earned is $2999.11

Explanation:

In the first account, $4,000 in an account earning 3.2% simple interest and time is 4 years

The formula to apply is;

A=P(1+r/n)^nt where

A=Amount at the end of the period= ?

P=starting amount = $4000

r=3.2% = 3.2/100 =0.032

n=number of times interest applied per time period=1

t=number of time period elapsed

Substituting the values in the formula;

A=P(1+r/n)^nt

A=4000(1+0.032)⁴

A=4000(1.032)⁴

A=4537.10

Interest earned = 4537.10-4000 = $537.10

In the account , $4,000 in a savings account earning 2.1% interest compounded annually

n=1 if compounded annually, then apply the formula;

A=P(1+r/n)^nt

A=4000(1+0.021)⁴

A=4000(1.021)⁴

A=4346.73

Interest earned = 4346.73-4000 = $346.73

In the account , $7,500 in a certificate of deposit earning 5% interest compounded quarterly, n=4

A=P(1+r/n)^nt

A=7500(1+0.05/4)^4*5

A=7500(1+0.0125)^20

A=7500(1.0125)^20

A=9615.28

Interest earned = 9615.28 - 7500 = $2115.28

Total interest earned = $537.10 +$346.73 + $2115.28 =$2999.11

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Compound Interest :brainly.com/question/7014337

Keywords : investment, account , earning, simple interest, compound interest, annually, quarterly

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