Question

Janine opens a savings account with a deposit of $7,200. The account pays 3.4% interest compounded daily. What is the first day's interest?

How many times would you have to use the simple interest formula to find the balance at the end of 1 year?

Answer 1

To find the first day's interest, use the compound interest formula. To find the balance at the end of 1 year, use the compound interest formula with the Number of Days as 365.

Step-by-step explanation:

To find the first day's interest, we need to use the formula for compound interest:

Interest = Principle × (1 + Rate/365)^(Number of Days) - Principle

For the given scenario:

• Principle = $7,200
• Rate = 3.4% = 0.034
• Number of Days = 1

Now, substituting these values into the formula:

Interest = $7,200 × (1 + 0.034/365)^(1) - $7,200

Interest = $7,200 × (1.00009342465) - $7,200

Interest ≈ $2.70

Therefore, the first day's interest is approximately $2.70.

To find the balance at the end of 1 year, we need to use the compound interest formula. In this scenario, the interest is compounded daily, so we use the following formula:

Balance = Principle × (1 + Rate/365)^(Number of Days)

For 1 year, the Number of Days = 365:

Balance = $7,200 × (1 + 0.034/365)^(365)