Question

11. Whitney opened a savings account 25 years ago with a deposit of $4,280.83. The account has an interest rate of 5.4% con

Whitney earned? (2 points)
$11.661.19
$4,511.99
$16,219.97
$11,939.14

Answer 1

Interest Whitney has earned is $11,939.14

Explanation:

First find Future value ; FV= PV(1+r)^n

PV = amount deposited in present value terms = 4,280.83

r= interest rate compounded twice/yr = 5.4% /2 = 2.7% or 0.027 as a decimal

n= total duration = 25*2 = 50

FV = 4,280.83 (1+0.027)^50

FV =4,280.83 * 3.78897884

FV= 16,219.97

To find the total amount of interest earned= FV - initial deposit

Interest = 16,219.97 - 4,280.83 = $11,939.14