Question

Kaitlyn opens an account with an initial deposit of $7,250. The account earns 10% interest compounded annually. What is the amount of interest earned after 18 months if no additional money is deposited or withdrawn?

Answer 1

the interest earned amount is $1,114.251

Explanation:

The computation of the interest earned is shown below:

But before that the future value is

= Present value × (1 + rate of interest)^number of years

= $7,250 × (1 + 0.10)^1.5

= $7,250 × 1.10^1.5

= $8,634.251

Now the interets earned is

= $8,634.251 - $7,250

= $1,114.251

Hence, the interest earned amount is $1,114.251