Question

michelle invested $10000 in an account that earns 8.5% interest that is compounded monthly. Determine the amount of interest earned on the principal in 15 years.

Answer 1

Answer:

$25,626.53

Step-by-step explanation:

You are going to want to use the compound interest formula, which is shown below.

$A=P(1+\frac{r}{n} )^{nt}$

P = initial balance

r = interest rate (decimal)

n = number of times compounded annually

t = time

First, change 8.5% into a decimal:

8.5% -> $\frac{8.5}{100}$ -> 0.085

Now lets plug in the values into the equation:

$A=10,000(1+\frac{0.085}{12})^{12(15)}$

$A=35,626.53$

Lastly, subtract the total from the initial balance:

$35,626.53 - 10,000 = 25,626.53$

Michelle earned $25,626.53 in interest.