Question

Aaron put $1000 in an account that pays 10% interest compounded quarterly he leaves it in the account for six months estimate how much interest he earns

Answer 1

$1000×10%=$100 six mouth=two quarterly. So, the answer should be $200.($100×2)

Answer 2

He earns $50.41 of interest.

Explanation:

The compound interest formula is given by:

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

Where A is the amount of money, P is the principal(the initial sum of money), r is the interest rate(as a decimal value), n is the number of times that interest is compounded per unit t and t is the time the money is invested or borrowed for(in years).

In this problem, we have that:

`P = 1000, r = 0.1, t = (6)/(12) = 0.5`

Compounded quartely

So 12/4 = 3 times a year, so
`n = 3`

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

`A = 1000(1 + (0.1)/(3))^(3*0.5) = 1050.41`

How much interest he earns?

A - P = 1050.41 - 1000 = 50.41

He earns $50.41 of interest.