Question

Leroy opened a savings account 18 years ago with a deposit of $2,651.43. The account has an interest rate of 2.8% compounded twice a year. How much interest has Leroy earned? (3 points)
$4,373.68

$2,725.67

$4,358.69

$1,722.25

Answer 1

Answer: $ 1722.25

Explanation:

Formula: Future value = Investment * (1 + r)^(n*t)

Data:

r = 2.8% / 2 = (2.8/100)/2 = 0.014

n = 2 (number of periods per year)

y = 18 years

Investment = $2,651.43

Calculations:

Future value = $2,651.43 * (1 + 0.014)^(2*18) = $2,651.43 * (1.014)^(36)

Future value = $4,373.68

Interests = future value - investment = $4,373.68 - $2,651.43 = $1,722.25

Answer 2

To calculate compound interest, the formula is as follows:
 Cf = Ci (1 + i) n
 Where:

 Cf = final capital.
 Ci = initial capital.
 i = is the interest rate, converted to a decimal number.
 n = the number of periods of the interest rate.

 Cf = 2651.43 (1 + 0.028/2) ^ 2*18 =  4373.67538
 4373.67538-2651.43= 1722.24538
 answer
 1722.25$