Question

Find the interest earned on a $50,000 deposited for six years at 1 1/8 % interest, compounded continuously

Answer 1

To calculate the interest earned, we can use the following equation:

`I=P((1+i)^n-1)`

Where P is the value of the deposit, i is the interest rate and n is the number of periods of time.

First, we need to calculate the equivalent value of 1 1/8 % as:

`1(1)/(8)\text{ \% = }(1\cdot8+1)/(8)\text{ \% = }(9)/(8)\text{ \% = 1.125\% = 0.01125}`

So, replacing P by $50,000, i by 0.01125, and n by 6, we get:

`\begin{gathered} I=50,000((1+0.01125)^6-1) \\ I=50,000(0.694) \\ I=3,471.3577 \end{gathered}`

Answer: $ 3,471.3577