Question

samantha invested $660 into in an account that paid 3.5% intrest compounded annually.samantha did not make any additional deposits ir wthdraws what is the total amount of intrest paid by this invesment at the end of 5 years

Answer 1

In order to determine the total amount of interest paid at the end of 5 years, use the following formula for compounded interest:

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

where

P: principal investment = $660

I: interes = ?

t: time = 5 years

n: subdivision in a period = 1 (because it is anually)

Replace the previous values of the parameters into the formula for I:

I = 660(1 + 0.035/1)(1·5)

I = 660(1.035)^5

I = 783.87

The interest is the subtraction in between the principal and final amount

$783.87 - $660 = $123.87