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?"

Answer 1

Answer:

$ 29.018 ( approx )

Explanation:

The amount formula in compound interest,

$A=P(1+r)^t$

Where,

P = principal amount,

r = rate per period,

t = number of periods,

Here, P = $ 3260.00,

Since, the amount is compounded monthly,

So, the number of periods in 3 months, t = 3,

Also, annual rate = 3.55 % = 0.0355,

So, the rate per month, r = $\frac{0.0355}{12}$  (∵ 1 year = 12 months)

Thus, the amount after 3 months,

$A=3260(1+\frac{0.0355}{12})^3=3289.01817638\approx 3289.018$

Hence, the total interest earned,

I = A - P =3289.018 - 3260 = $ 29.018