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5 votes
5 votes
Bruce deposited $8 in a savings account earning 1% interest, compounded annually.To the nearest cent, how much interest will he earn in 3 years?

User Vin Gazoil
by
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1 Answer

10 votes
10 votes

We would apply the formula for determining compound interest which is expressed as

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

Where

t represents the number of years

r represents the interest rate

P represents the principal or initial amount deposited

n represents the periodic interval at which it was compounded

From the information given,

t = 3

p = 8

r = 1/100 = 0.01

n = 1 because it was compounded annually

Thus,

A = 8(1 + 0.01/1)^1 * 3

A = 8(1.01)^3

A = 8.2424

The interest earned = 8.2424 - 8 = 0.2424

To the nearest cent, the interest earned is $0.24

User Sunflowerpower
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