Question

Calculate the amount of interest Jim will earn if he puts the $5,000 he received for graduating high school into a savings account with a five percent annual interest rate paid quarterly and does not touch the money until he graduates college in four years.

Answer 1

To calculate the amount of interest Jim will earn, we can use the formula for compound interest:

A = P*(1 + r/n)^(n*t)

where:

A = the final amount

P = the principal (initial) amount

r = the annual interest rate (as a decimal)

n = the number of times the interest is compounded per year

t = the time period, in years

In this case, Jim has put $5,000 in a savings account with a 5% annual interest rate, paid quarterly (n = 4), and left it untouched for 4 years (t = 4).

So, we have:

P = $5,000

r = 0.05 (5% as a decimal)

n = 4

t = 4

Plugging these values into the formula, we get:

A = $5,000*(1 + 0.05/4)^(4*4) = $6,381.44

So, the final amount Jim will have after 4 years is $6,381.44. To find the amount of interest earned, we need to subtract the initial principal amount from the final amount:

Interest = $6,381.44 - $5,000 = $1,381.44

Therefore, Jim will earn $1,381.44 in interest over four years.

I hope I helped!

~~~Harsha~~~