Question

$20,000 is put into an empty savings account with a nominal interest rate of .01%. no other contributions are made to the account. with monthly compounding, how much interest will have been earned after fifteen years?

Answer 1

The interest that will have been earned after fifteen years is $306.94.

Step-by-step explanation:

The formula to calculate compound interest is:

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

Where:

• A = the future value of the investment/loan, including interest
• P = the principal investment amount
• r = the annual interest rate (decimal)
• n = the number of times that interest is compounded per year
• t = the number of years the money is invested/borrowed for

In this case, we have:

• P = $20,000 (principal investment)
• r = 0.01 (annual interest rate)
• n = 12 (monthly compounding)
• t = 15 (number of years)

Using the formula, we can find the amount of interest earned:

A = 20000(1+0.01/12)^(12*15)

A = $20,306.94

To find the amount of interest earned, we subtract the principal investment from the future value:

Interest = A - P = 20306.94 - 20000 = $306.94