Question

Cameron has decided to diversify his investments in the following way: $3,000 in an account earning 2.7% simple interest $5,000 in a savings account earning 1.8% interest compounded annually $5,000 in a certificate of deposit earning 3.9% interest compounded quarterly How much total interest will Cameron earn on his investments at the end of 3 years

Answer 1

Answer:

The amount of total interest Cameron will earn on his investments at the end of 3 years is $1,171.80.

Explanation:

Let:

P = Principal

r = interest rate

t = number of years

n = number of times the interest is compounded in a year

Therefore, we have:

Interest on the account with simple interest after 3 years = P * r * t = $3,000 * 2.7% * 3 = $243

Interest on saving account after 3 years = (P * (1 + (r/n))^(n * t)) - P = ($5,000 * (1 + (1.8%/3))^(1 * 3)) - $5,000 = $90.54

Interest on certificate of deposit after 3 years = (P * (1 + (r/n))^(n * t)) - P = ($5,000 * (1 + (3.9%/3))^(4 * 3)) - $5,000 = $838.26

Total interest earned after 3 years = Interest on the account with simple interest after 3 years + Interest on saving account after 3 years + Interest on certificate of deposit after 3 years = $243 + $90.54 + $838.26 = $1,171.80

Therefore, the amount of total interest Cameron will earn on his investments at the end of 3 years is $1,171.80.