Question

Nicolas has $6,500 to deposit into an account which earns 3.25% interest compounded annually. How interest will he have earned at the end of 8 years.

Answer 1

We have been given that Nicolas has $6,500 to deposit into an account which earns 3.25% interest compounded annually. We are asked to find amount of interest earned at the end on 8 years.

We will use compound interest formula to solve our given problem.

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

A = Final amount,

P = Principal amount,

r = Annual interest rate in decimal form,

n = Number of times interest is compounded per year,

t = Time in years.

$3.25\%=\frac{3.25}{100}=0.0325$

$A=6500(1+\frac{0.0325}{1})^{1\cdot 8}$

$A=6500(1+0.0325)^{8}$

$A=6500(1.0325)^{8}$

$A=6500(1.2915775352963673)$

$A=8395.253979$

Now we will subtract principal amount from final amount to find amount of interest as:

$\text{interest}=8395.253979-6500$

$\text{interest}=1895.253979\approx 1895.25$

Therefore, Nicolas would have earned $1895.25 in interest at the end of 8 years.