Question

Jackson deposited $160 a month into an account earning 7.2% compounded monthly for 12 years. He left the accumulated amount for another 3 years at the same interest rate. How much total interest did he earn?

Answer 1

Using the formula for the compound interest, we have:

`\begin{gathered} A=P(1+(r)/(n))^(nt) \\ \text{ A:amount,P:principal,r:rate,n: number of times interest is compounded per year,t:time in years.} \\ A=160(1+(0.072)/(12))^(12\cdot15)\text{ (Replacing the values)} \\ A=160(1+0.006)^(180)\text{ (Dividing and multiplying)} \\ A=160\cdot2.935\text{ (Adding and raising the result to the power of 180)} \\ A=469.63\text{ (Multiplying)} \\ \text{Interest}=\text{ Amount - Principal=469.63}-160=309.63 \\ \text{The answer is \$309.63} \end{gathered}`