Question

Mathew deposits 400800.00 kina with the bank which offers 5½% interest per annum. calculate the interest earned after four years if it is compounded annually?

Answer 1

For this case we can use the following formula:

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

where

A= future value, P= present value= 400800.00

r= 5.5%=0.055, n =1 , t= 4 years

n= represent the number of times that the interest is compounded each year =1 for this case

Replacing we got:

`A=400800\cdot(1+(0.055)/(1))^(4\cdot1)=496520.92`

then we can find the interest in the following way:

`I=A-P=496520.92-400800=95720.919`