Question

an investment of $6,599.20 earns 4.2% compounded monthly over 7 years how much interest is earned on the investment

Answer 1

Answer:

Interest earned on the investment is; $2237.31254875

Step-by-step explanation:

Given:  Principal (P) = $6, 599.20  r= 4.2% and t = 7 years.

Formula for annual compound interest, including principal sum is:

$A = P(1+\frac{r}{100n})^{nt}$             .....[1]

where ;

A represents the total amount , including interest.

P represents the initial deposits

r represents the rate of interest

t represents the number of times that the interest is compounded per year

n represents the number time that interest is compounded per year

Here, n = 12

therefore,

Substituting the values of P= $6, 599.20  r= 4.2% and t = 7 years in equation [1];

$A = 6599.20(1+\frac{4.2}{1200})^{7 \times 12} = 6559.20(1+0.0035)^{84}$

Simplify:

A = $8796.51254875

We have to find the interest is earned on the investment;

Use the formula:

A = I + P or

I = A - P

where,

I represents the interest earned on the investment;

we have;

I = 8796.51254875 - 6559.20 = $2237.31254875

Therefore, the interest earned on the investment is; $2237.31254875

Answer 2

First calculate the future value
The formula is
A=p (1+r/k)^kt
A future value?
P present value 6599.2
R interest rate. 0.042
K compounded monthly 12
T time 7 years
A=6,599.2×(1+0.042÷12)^(12×7)
A=8,850.16

Now calculate the interest earned
I=A-p
I=8,850.16−6,599.2
I=2,250.96

Hope it helps!