Question

Refer to Narrative 11-1. Calculate the compound interest on an investment of $45,000 at 6% interest, compounded quarterly, for 3 years.

Answer 1

Answer:

$880.28

Step-by-step explanation:

We are asked to find the compound interest on an investment of $45,000 at 6% interest, compounded quarterly, for 3 years.

We will use compound interest formula.

$A=P(1+\frac{r}{n})^{nT}$, where,

A = Amount after T years,

P = Principal amount,

r = Annual interest rate in decimal form,

n = Number of times interest is compounded per year,

T = Time in years.

$r=6\%=\frac{6}{100}=0.06$

$A=\ 4500(1+\frac{0.06}{4})^{4*3}$

$A=\ 4500(1+0.015)^{12}$

$A=\ 4500(1.015)^{12}$

$A=\ 4500*1.1956181714615353$

$A=\ 5380.2817715$

$A\approx \ 5380.28$

Interest would be final amount minus principal amount.

$\text{Interest}=\ 5380.28-\ 4500$

$\text{Interest}=\ 880.28$

Therefore, the amount of interest after 3 years would be $880.28.

Answer 2

$A = P(1 + r/n)^{nt}$
P= 45000
R= 6%
N= 4x/year
T= 3 years

A= $53,802.82
P= $45,000.00

Interest Earned: $8,802.82