Question

Refer to Narrative 11-1. Calculate the compound interest on an investment of $45,000 at 6% interest, compounded quarterly, for 3 years.

Answer 1

`A = P(1 + r/n)^(nt)`
P= 45000
R= 6%
N= 4x/year
T= 3 years

A= $53,802.82
P= $45,000.00

Interest Earned: $8,802.82

Answer 2

$880.28

Explanation:

We are asked to find the compound interest on an investment of $45,000 at 6% interest, compounded quarterly, for 3 years.

We will use compound interest formula.

`A=P(1+(r)/(n))^(nT)`, where,

A = Amount after T years,

P = Principal amount,

r = Annual interest rate in decimal form,

n = Number of times interest is compounded per year,

T = Time in years.

`r=6\%=(6)/(100)=0.06`

`A=\$4500(1+(0.06)/(4))^(4*3)`

`A=\$4500(1+0.015)^(12)`

`A=\$4500(1.015)^(12)`

`A=\$4500*1.1956181714615353`

`A=\$5380.2817715`

`A\approx \$5380.28`

Interest would be final amount minus principal amount.

`\text{Interest}=\$5380.28-\$4500`

`\text{Interest}=\$880.28`

Therefore, the amount of interest after 3 years would be $880.28.