Question

You save $3,260.00 in a savings account earning a 3.55% APR compounded monthly. How much is the total interest earned by the end of the third month? a) $23.56 b) $21.02 c) $28.59 d) $27.01

Answer 1

$28.59

Explanation:

GradPoint doesn't seem to have the correct answer. THe closest I could get was to take 3,260 x .0355 x 90/365 = 28.54

Answer 2

$29.02

Step-by-step explanation:

We will use compound interest formula to find the amount of interest after 3 months.

`A=P(1+(r)/(n))^(nT)`, where,

A= Amount after T years.

P= Principal amount.

r= Annual interest rate in decimal form.

n= Number of times interest is compounded per year.

T= Time in years.

Let us convert our given interest rate in decimal form.

`3.55\%=(3.55)/(100)=0.0355`

Let us convert our given time in years.

`3\text{ months}=(3)/(12)\text{ years}=0.25\text{ years}`

Let us substitute our given values in above formula.

`A=3260(1+(0.0355)/(12))^(12* 0.25)`

`A=3260(1+0.0029583333333333)^(3)`

`A=3260(1.0029583333333333)^(3)`

`A=3260* 1.0089012810988858948`

`A=3289.018176382368017048`

We will use formula
`A=P+I` to find the amount of interest.

`3289.018176382368017=3260+I`

`3289.018176382368017-3260=I`

`29.018176382368017=I`

`I\approx 29.02`

Therefore, the total interest earned by the end of the third month will be $29.02.