Question

The principal represents an amount of Principal Rate Compounded Time money deposited in a savings account subject to compound interest at the $6000 2% annually 2 years given rate. A. Find how much money there will be in the account after the given number of years. B. Find the interest earnedA. The amount of money in the account after 2 years is $ B. The amount of interest earned is $

Answer 1

Given

Principal

6000

Rate

2%

Compounded

Annually

Time

2 years

Procedure

Compound Interest Equation

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

Where:

A = Accrued Amount (principal + interest)

P = Principal Amount

I = Interest Amount

R = Annual Nominal Interest Rate in percent

r = Annual Nominal Interest Rate as a decimal

r = R/100

t = Time Involved in years, 0.5 years is calculated as 6 months, etc.

n = number of compounding periods per unit t; at the END of each period

First, convert R percent to r a decimal

r = R/100

r = 2%/100

r = 0.02 per year,

Then, solve our equation for A

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

A = 6,000.00(1 + 0.02/1)^((1)(2))

A = $ 6,242.40

Summary:

The total amount accrued, principal plus interest,

from compound interest on an original principal of

$ 6,000.00 at a rate of 2% per year

compounded 1 times per year

over 2 years is $ 6,242.40.

I = 6242,40 - 60000

I = 242.40

Interes would be $242.4