Question

Karine invests $6,100 in an account with an annual interest rate of 4.5% compounded daily for 2 years.What is the return on investment for Karine's account?

Answer 1

Answer:

The return on investment for Katerine's account = 9.4%

Step-by-step explanation:

Amount invested is the principal

Principal, P = $6,100

Annual Interest Rate, r = 4.5% = 0.045

The interest is compounded daily

Number of times the interest is compounded per year, n = 365

Number of years, t = 2 years

The amount after 2 years is calculated as:

`\begin{gathered} A(t)=P(1+(r)/(n))^(nt) \\ A=6100(1+(0.045)/(365))^(365(2)) \\ A=6100(1.094) \\ A=6673.4 \end{gathered}`

The amount after 2 years = $6673.4

The interest = Amount - Principal

The interest = $6673.4 - $6100

The interest = $573.4

The return on investment is calculated as:

`\begin{gathered} \text{ROI = }\frac{Interest}{Pr\text{incipal}}*100\text{ \%} \\ \text{ROI}=(573.4)/(6100)*100\text{ \%} \\ \text{ROI = }9.4\text{ \%} \end{gathered}`

The return on investment for Katerine's account = 9.4%