Question

Using the expression above, choose the correct answers for the new balance and the amount of interest earned in the following compound interest problem. $850 at 8% for 8 years, compounded annually.
Total Amount = $
Interest Amount = $

Answer 1

*Keywords:

Expression, Compound interest, down payment, time.

The expression that is used to calculate payments with compound interest has the following elements: An initial payment P0, a compound interest rate r, a period of time t and an income I. The formula has the following form:

$I = P_0 (1 + r) ^ t$

In this case we have an interest rate r = 0.08, t = 8 years, initial fee P0 = 850

So:

$I = 850 (1 + 0.08) ^ 8$

I = $ 1573.29

Then, the amount obtained by interest is:

$ 1573.29 - $ 850 = $ 723.29

Answer:

Total amount = $ 1573.29

Amount of interest = $723.29