Question

You invest $75.00 the first month and $1,000.00 the second month at 3.75% APR. How much interest do you accrue at the end of the second month?

Answer 1

Answer

At end of the second month you earned $3.36 as interest.

Step by step explanation

First month investment = $75

Rate of interest = 3.75% APR = 3.75/100 = 0.0375

Monthly interest = 0.0375/12 = 0.003125

At end of the first month interest amount = 0.003125 *75 = 0.234375

= $0.23

Amount after 1st month = 75 + 0.23 = $75.23

Second month invested $1000/

So the principle amount at beginning of the second month = $1000 + $75.23

P = $1075.23

Second month interest = 1075.23*0.003125 = $3.36

Therefore, at end of the second month you earned $3.36 as interest.

Thank you. :)