Question

You save $3,260.00 in a savings account earning a 3.55% APR compounded monthly. How much is the total interest earned by the end of the third month? a) $23.56 b) $21.02 c) $28.59 d) $27.01

Answer 1

Answer:

$29.02    

Step-by-step explanation:  

We will use compound interest formula to find the amount of interest after 3 months.

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

Let us convert our given interest rate in decimal form.

$3.55\%=\frac{3.55}{100}=0.0355$

Let us convert our given time in years.

$3\text{ months}=\frac{3}{12}\text{ years}=0.25\text{ years}$

Let us substitute our given values in above formula.

$A=3260(1+\frac{0.0355}{12})^{12\times 0.25}$

$A=3260(1+0.0029583333333333)^{3}$

$A=3260(1.0029583333333333)^{3}$

$A=3260\times 1.0089012810988858948$

$A=3289.018176382368017048$  

We will use formula $A=P+I$ to find the amount of interest.

$3289.018176382368017=3260+I$

$3289.018176382368017-3260=I$

$29.018176382368017=I$

$I\approx 29.02$

Therefore, the total interest earned by the end of the third month will be $29.02.

Answer 2

Answer:

$28.59

Step-by-step explanation:

GradPoint doesn't seem to have the correct answer. THe closest I could get was to take 3,260 x .0355 x 90/365 = 28.54