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Interest on interest, or compound interest, is the adding of interest to the principal sum of a loan or deposit. The amount that will be in Amanda's account after a period of 8 years is $5,370.57.
<h3>What is compound interest?</h3>Interest on interest, or compound interest, is the adding of interest to the principal sum of a loan or deposit. It's the outcome of reinvesting interest rather than paying it out so that interest is received on the principal plus previously collected interest in the next quarter.,
The formula for compound interest is written as,
A is the final amount
P is the principal amount
r is the rate of interest
n is the number of times the money is compounded in a year
t is the number of years
Given the following details about the account that Amanda owns,
The Principal amount, P is $4000; the rate of interest (r) is 3.7%; the amount is compounded quarterly, therefore, n=4. Also, the amount is invested for a period of 8 years. Thus, the amount in the account after 8 years will be,
Hence, the amount that will be in Amanda's account after a period of 8 years is $5,370.57.
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