Question

Nathan opened a savings account 11 years ago with a deposit of $2,665.79. The account has an interest rate of 4.8% compounded quarterly. How much interest has Nelson

earned?
$2,793.75
$1,798.99
$1,839.97
$4,505.76

Answer 1

Explanation:

Use the Compound Amount equation: A = P(1+r/n)^(nt), where P is the original amount (principal), r is the interest rate as a decimal fraction, n is the number of compounding periods per year, and t is the number of years. Here we have:

A = ($2665.79)(1 + 0.048/4)^(4*11), or:

A = ($2665.79)(1.012)^44 = $4505.76.

Subtracting the principal amount from this result, we get:

$4505.76 - $2665.79 = $1839.97

This matches the third of the four given possible answers.