Question

You save 3 ,260.00 in a savings account earning a 3.55% APR compounded monthly. How much is the total interest earned by the end of the third month?

Answer 1

The answer will be $29.02. :)

Answer 2

$29.02.

Explanation:

We have been given that you save 3 ,260.00 in a savings account earning a 3.55% APR compounded monthly. We are asked to find the total interest earned by the end of the third month.

We will use compound interest formula to solve our given problem.

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

A = Amount of interest after t years,

P = Principal amount,

r = Annual interest rate in decimal form,

n = Number of periods interest is compounded per year,

t = Time in years.

`3.55\%=(3.55)/(100)=0.0355`

`\text{3 months}=(3)/(12)\text{ year}=(1)/(4)\text{ year}`

Upon substituting our given values in above formula, we will get:

`A=3,260(1+(0.0355)/(12))^{12* (1)/(4)}`

`A=3,260(1+0.002958333)^(3)`

`A=3,260(1.002958333)^(3)`

`A=3,260*1.00890128109888`

`A=3289.0181763823\approx 3289.02`

Now, we will subtract principal amount from final amount to find amount of interest.

`\text{Amount of interest}=3289.02-3260`

`\text{Amount of interest}=29.02`

Therefore, you will earn am amount of $29.02 by the end of the third month.