Question

You have$560 in an account which pays 4.8% compounded annually. If you invest your money for 8 years, then how many dollars of interest will you earn by the end of term

Answer 1

$ 254.85

Explanation:

Total amount invested = $ 560

Interest rate = r = 4.8% = 0.048

Time in years = t = 8 years

The formula for compound interest is:

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

Here,

A is the total amount accumulated after t years. P is the amount invested initially and n is the compounding periods per year. Since in this case compounding is done annually, n will be 1. Using the values in the above formula, we get:

`A=560(1+(0.048)/(1))^(8) = \$ 814.85`

Thus, the total amount accumulated after 8 years will be $ 814.85

The amount of interest earned will be:

Interest = Amount Accumulated - Principal Amount

Interest = $ 814.85 - $ 560 = $ 254.85

By the end of 8 years, $ 254.85 would be earned in interest.