Question

The principal represents an amount of money deposited in a savings account subject to compound interest at the given rate. Principal Rate Compounded Time $ 9500 3 % quarterly 4 years A. Find how much money there will be in the account after the given number of years. B. Find the interest earned.

Answer 1

Answer:

After 4 years the amount of money in the account will be $10,704.8

The interest earned is $1,204.8

Explanation:

To calculate future value on a certain amount (principal), with compound interest, the formula below is used:

FV = PV × $(1+\frac{r}{n}) ^{n*t}$

where:

FV = Future value

PV = present value = principal = $9,500

r = interest rate in decimal = 3% = 0.03

n = compounding period per year = quarterly = 3 times per year

t = time in years = 4 years

∴ FV = 9,500 × $(1+\frac{3}{0.03}) ^{3*4}$

FV = 9,500 × $1.001^{12}$

FV = $10,704.8 (to 1 decimal place)

interest earned = future value - Present value

= 10,704.8 - 9,500 = $1,204.8