Question

#1a.) What will be the balance in the account at the end of the investment period?b.) How much interest will be earned?The rate is 7 1/2%

Answer 1

a. $5801.11

b. $801.11

EXPLANATION :

Recall the compound interest formula :

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

where A = Future amount

P = Principal amount

r = rate of interest

n = number of compounding in a year

t = time in years

From the problem, the principal amount is P = $5000

the rate of interest is r = 7.5% or 0.075

n = 4 times in a year

t = 2 years

Using the formula above :

`\begin{gathered} A=5000(1+(0.075)/(4))^(4(2)) \\ \\ A=5801.11 \end{gathered}`

a. The balance at the end of the investment period is $5801.11

b. The interest earned is the difference between the future amount and the principal amount.

That will be :

`5801.11-5000=801.11`