Question

Theodore deposited $2400 into a savings account for which interest is compounded monthly at a rate of 2.8%. How much interest will he earn after 5 years? Explain.

A.$360.21
B.$648.24
C.$955.27
D.$2760.21

Answer 1

The Answer is $360.21. Hope this helps!

Answer 2

A. $360.21

Explanation:

Since, when in an amount the interest is compounded monthly,

Then, the final amount after t years is,

`A=P(1+(r)/(12))^(12t)`

Where, r is the annual interest,

P is the principal amount,

Here, P = $ 2400, r = 2.8 % = 0.028 and t = 5 years,

Hence, the amount after 5 years,

`A=2400(1+(0.028)/(12))^(12* 5)`

`=2400(1+\frac{0.028})^(60)`

`=2760.20694682\approx \$ 2760.21`

Therefore, the interest after 5 years is,

`I=A-P`

`=\$ 2760.21 - \$ 2400=\$ 360.21`

Option A is correct.