Question

Mary has $6,000 saved for her college education. She invested that money at 2.3% interest per year. Suppose her account earned interest compounded annually. How much interest would she earn in 3 years?

Answer 1

Interest= $423.59

Explanation:

Giving the following information:

Initial investment (PV)= $6,000

Number of periods (n)= 3 years

Interest rate (i)= 2.3% = 0.023

To calculate the Future Value, we need to use the following formula:

FV= PV*(1+i)^n

FV= 6,000*(1.023^3)

FV= $6,423.59

Now, the interest earned:

Interest= 6,423.59 - 6,000

Interest= $423.59