Question

Suppose that $15,000 is the deposited for five years at 4% APR calculate the interest earned if interest is compounded semiannually round your answer to the nearest cent

Answer 1

Remember that

The compound interest formula is equal to

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

where

A is the Final Investment Value

P is the Principal amount of money to be invested

r is the rate of interest in decimal

t is Number of Time Periods

n is the number of times interest is compounded per year

in this problem we have

P=$15,000

t=5 years

r=4%=0.04

n=2

substitute the given values

`A=15,000(1+(0.04)/(2))^(2\cdot5)`

A=$18,284.92

therefore

The interest is equal to

I=A-P

I=18,284.92-15,000

I=$3,284.92