Question

Mathew deposits 400800.00 kina with the bank which offers 5½% interest per annum. calculate the interest earned after four years if it is compounded every three months?

Answer 1

For this case we can use the following formula:

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

Where:

P= 400800 = present value

A= future value

r= 0.055 interest rate

n= 4, number of times that the interest is compund in a year (quarterly)

t= 4 years

Replacing we got:

`A=400800(1+(0.055)/(4))^(4\cdot4)=498679.58`

then the interest would be:

`I=A-P=498679.58-400800=97879.58`