Question

Using the chart "Amount of $1 at Compound Interest" from previous reading section "More Compound Interest", find the total amount and amount of interest paid in the following compound interest problems. $900 at 6%, for 10 years

Answer 1

Annually: Total Amount= $1,611.76 Interest Amount= $711.76

Semiannually: Total Amount= $1,625.50 Interest Amount= $725.50

Quarterly: Total Amount= $1,632.62 Interest Amount= $732.62

Answer 2

Explanation:

We will use the formula,

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

where A= accrued interest

r= rate of interest (0.06)

t = time (10)

n = no. of times amount paid in a year

P = principle (900)

1) When calculated annually, we have n = 1 ,

A= 900(1+0.06)^{10}

= $1611.76

Since A= Principle amount + interest

Interest = 1611.76-900 = $711.76

2) When calculated semi annually, n = 2

A= 900(1+0.06/2)^{20}

= 1625.5

Interest = $725.5

3) When calculated quarterly, n= 3

A= 900(1+0.06/3)^(30}

= 1630.22

Interest = $730.22