Question

Home city bank pays 5% interest compounded quarterly on regular savings accounts. Miguel cardosa deposited 1000 for 1 year. He made no other deposits or withdrawals. How much interest did he earn during the year.

Answer 1

The interest earned was $50.95

Explanation:

we know that

The compound interest formula is equal to

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

where

A is the Final Investment Value

P is the Principal amount of money to be invested

r is the rate of interest in decimal

t is Number of Time Periods

n is the number of times interest is compounded per year

in this problem we have

`t=1\ year\\ P=\$1,000\\ r=5\%=5/100=0.05\\n=4`

substitute in the formula above

`A=1,000(1+(0.05)/(4))^(4*1)`

`A=1,000(1.0125)^(4)`

`A=\$1,050.95`

Find the interest earned I

we know that

`I=A-P`

substitute the values

`I=\$1,050.95-\$1,000=\$50.95`