Question

Antuan deposited $2590 into a 3 year CD at an interest rate of 2.3% compounded quarterly.

How much interest did the account earn after the three years? Show your work.

Answer 1

the interest rate is $183.89 =~ $ 184

Explanation:

In this question, Antuan deposited $2590 into a 3 year CD (Certificate of Deposit) at an interest rate of 2.3% compounded quarterly. We need to find the interest account earned after 3 years.

Formula used will be :

`Interest = P ( 1 + r/n) ^ n ^ t - P`

Where

P= Principal amount

r= interest rate (in decimals)

n= no of times the interest is compounded

t = no of years

Here we are subtracting P because we only need interest amount and not the future value.

Using this formula and finding the value will be:

P= $2590

r = 2.3 % or 0.023

n = 4

t = 3

`Interest = 2590 * ( 1 - 0.023 / 4) ^ 4^ * ^ 3 - 2590`

`Interest= 2590 (1.071) -2590\\Interest= 2773.89 - 2590\\Interest= 183.89`

So the interest rate is $183.89 =~ $ 184