Question

Ormondo inherited $7,000. He would like to invest all the money to use for his daughter's college in 10 years. If he invests $7,000 at 6.75% for a 10-year period, how much interest will he have earned?

Answer 1

If interest computation is based solely on the invested amount of $7,000.00, interest per year is $472.50. For 10 years, the daughter will earn a total of $4,725.00 interest on top of the invested amount. But if interest is compounded annually, then the total interest at the end of 10 years would be $6,451.69.