Question

Huan deposited $900 into a college savings account earning 4.6% interest compounded annually. He also deposited $900 into a second account earning 4.6% simple interest. He made no additional deposits. Part 1 out of 3 How much interest does the first account earn in 10 years? If necessary, round to the nearest cent.

Answer 1

The first account earns an interest of $511.11

Explanation:

a). Interest in the first account

The total amount of interest earned in 10 years can be expressed as;

Compound interest=(P(1+r/n)^nt)-P

Where;

P=Principal amount

r=Interest rate

n=number of times the interest is compounded annually

t=number of years the account is kept

In our case;

P=$900

r=4.6/100=0.046

n=1

t=10 years

Replacing;

Compound interest=900(1+0.046/1)^(1×10)-(900)

Compound interest=900(1.046)^10-(900)

Compound interest=1,411.105-900

Compound interest=$511.105

Nearest cent=1/100=0.01 two decimal places

511.105=511.11

The first account earns an interest of $511.11