Question

2 % compound interest. how much interest will be paid on $400 earning 2% compounded quarterly after 4 y?

Answer 1

Compound interest formula:

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

P is the principal

r is the interest rate in decimal form

n is the number of times interest is compounded

t is the time in years

For the given situation:

P= $400

r= 0.02

n= 4 (quarterly)

t=4

`\begin{gathered} CI=400(1+(0.02)/(4))^(4\cdot4)-400 \\ \\ CI=400(1.005)^(16)-400 \\ \\ CI=33.23 \end{gathered}`

Then, the interest paid is $33.23