Question

How much interest will a principal of 16,500$ earn in 18 months?

Answer 1

Step 1:

In this question, we are given the following:

Step 2:

From the question, we can see that the formulae for compound interest is given as:

`\begin{gathered} A\text{ = P( 1 + }(R)/(100))^(nt) \\ \text{where P = \$ }16,500\text{ } \\ R\text{ = 12\%} \\ T\text{ = 18 months = (}(18)/(12))\text{ years} \\ n\text{ = quarterly compounded = 4} \end{gathered}`

Calculating this, we have that:

From the calculations, we can see that the Amount after 18 months

`\approx\text{ \$ 19, 701. 86 ( 2 decimal places)}`

Now, we can see that:

`\begin{gathered} \text{Interest = Amount - Principal} \\ \text{Interest = 19701. 86 - 16,500} \\ \text{Interest = \$ 3201.86} \end{gathered}`

CONCLUSION:

From the above calculations, we can see that the Interest = $ 3201. 86