Answer:
Edgar will earn $3,646.30 in interest over 3 years.
Explanation:
I'd be happy to walk you through the problem step by step!
The problem is asking how much interest Edgar will earn in 3 years on an initial deposit of $7,000 that earns 15% interest compounded annually.
To solve this problem, we need to use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = the final amount including interest
P = the principal amount (the initial deposit)
r = the annual interest rate (as a decimal)
n = the number of times the interest is compounded per year
t = the time (in years) the money is invested
We are given that:
P = $7,000
r = 15% = 0.15 (as a decimal)
n = 1 (compounded annually)
t = 3 years
Now, we can plug these values into the formula and solve for A, which is the final amount including interest:
A = $7,000(1 + 0.15/1)^(1*3)
We simplify the expression inside the parentheses first, by dividing the annual interest rate by the number of times the interest is compounded per year:
A = $7,000(1.15)^(3)
We raise 1.15 to the power of 3 using a calculator or by multiplying 1.15 by itself 3 times:
A = $7,000(1.5209)
We multiply the initial deposit by the final amount including interest to get the total amount of interest earned:
Interest = $7,000(1.5209) - $7,000
We simplify the expression:
Interest = $10,646.30 - $7,000
Interest = $3,646.30
So, Edgar will earn $3,646.30 in interest over 3 years.
Hope this helped! If it didn't, I'm sorry! If you still need more help on this, ask me! :]