Question

If you invest $4532 at 6% interest that is compounded monthly for 6 years what is the interest you earned? What would your total investment be?

Answer 1

Interest Earned = $1958

Value of total investment - $6490

Explanation:

We can solve for both the questions by using the formula:

`A=P(1+(r)/(n))^(nt)`

Where,

A is the future amount (original PLUS interest)

P is the initial amount

r is the rate of interest

n is the number of times interest is compounded per year

t is the time in years

For out problem, P = 4532, r is 0.06 (6%), n is 12 (since monthly compounding in 1 year), t = 6. Plugging these into the equation, we get A (the future amount).

`A=P(1+(r)/(n))^(nt)\\A=4532(1+(0.06)/(12))^((12)(6))\\A=4532(1.005)^(72)\\A=6490`

This is the amount including interest. Hence,

Interest earned = 6490 - 4532 = $1958

Your total investment would be A, which is $6490