204k views
4 votes
principal of $8,270 is placed in an account that earns interest at the rate of 8% and is compounded quarterly.Approximately how much interest is earned on the investment at the end of 7 years? Show your work.

1 Answer

3 votes

ANSWER:

The interest is $6128.3

Explanation:

We have the following formula to calculate the interest generated over time:


\begin{gathered} FV=P\cdot(1+(r)/(n))^(n\cdot t) \\ \text{where P is the principal, r is the interest rate, n is the time period and t is the time} \end{gathered}

Therefore:

The period of time is quarterly, therefore n is equal to 4, since during a year there are 4 quarters. Replacing:


\begin{gathered} FV=8270\cdot(1+(0.08)/(4))^(4\cdot7) \\ FV=14398.3 \end{gathered}

This would be the total value to be paid, the interest generated would be the subtraction between the initial value (principal) and this total value, therefore:


\begin{gathered} I=14398.3-8270 \\ I=6128.3 \end{gathered}

User Kendar
by
8.3k points

No related questions found

Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

9.4m questions

12.2m answers

Categories