Question

Principle: $6500 Rate: 3%

Compounded: Daily Time: 5 years

A. Find How much money there will be in the account after the given number of years. (Assume 360 days in a year)
The amount of money in the account after 5 years is $________ (round to the nearest hundredth as needed)

B. Find the interest earned.

Answer 1

Explanation:

A)Initial amount deposited into the account is $6500 This means that the principal is P, so

P = 500

It was compounded daily. This means that it was compounded 360 times in a year. So

n = 360

The rate at which the principal was compounded is 3%. So

r = 3/100 = 0.03

It was compounded for 5 years. So

t = 5

The formula for compound interest is

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

A = total amount in the account at the end of t years. Therefore

A = 6500 (1+0.03/360)^360×5

A = 6500 (1+0.00008333333)^360×5

A = 6500 (1.00008333333)^1800

A = $7551.70

B) The interest earned is Total amount earned - principal. It becomes

7551.7 - 6500 = $1051.7