Question

If 12,025 was invested at 3.25% compounded monthly 3 years, how much interest will be earned

Answer 1

Answer:

$1,229.75

Step-by-step explanation:

Lets use the compound interest formula provided to solve this:

$A=P(1+\frac{r}{n} )^{nt}$

P = initial balance

r = interest rate (decimal)

n = number of times compounded annually

t = time

First, change 3.25% into a decimal:

3.25% -> $\frac{3.25}{100}$ -> 0.0325

Since the interest is compounded monthly, we will use 12 for n. Lets plug in the values now:

$A=12,025(1+\frac{0.0325}{12})^{12(3)}$

$A=13,254.75$

Lastly, subtract A from P to get the interest earned:

$13,254.75 - 12,025 = 1,229.75$