Question

How much interest is earned in an investment if $720 is deposited monthly at 7.8% compounded monthly if the term of the investment is 6 years?$__________Round to the nearest cent

Answer 1

Given:

The initial investment is, P = $720.

The rate of interest is, r = 7.8% = 0.078.

The number of years of investment is, t = 6 years.

Step-by-step explanation:

The general formula to find the compound interest is,

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

Here, n represents the number of times compounded in a year. It is given that the amount is compounded monthly, so the value of n = 12.

To find total amount after 6 years:

Now, substitute the given values in the general equation.

`\begin{gathered} A=720(1+(0.078)/(12))^(12(6)) \\ =720(1+0.0065)^(72) \\ =1147.95 \end{gathered}`

Thus, the total amount earned is $1147.95.

To fnd interest amount:

Now, the amount of interest can be calculated as,

`\begin{gathered} I=A-P \\ =1147.95-720 \\ =427.95 \end{gathered}`

Hence, the interest amount earned is $427.95 and the total amount earned is $1147.95.