Question

A $20,000 deposit was placed in a bank paying 5.75% interest compounded quarterly. After 12 months, how much interest was earned.

Answer 1

$P = 20,000 \\ R = 5.75 \\ T = 1 \\ I = \frac{PRT}{100} \\ = \frac{20000 * 5.75*1}{100} \\ = 115000/100 \\ = 1150$

Answer 2

After 1 year, the bank paid (5.75/4) percent, 4 times.

The value of the investment is (20,000) times (1 + 0.0575/4) to the 4th power.

(1 + 0.0575/4) = 1.014375

That number to the 4th power is 1.05875... (rounded)

The interest alone is (20,000) times (0.05875...) =  $1,175.04