Question

Compound Interest:

A = P(1 + (r/n)) ^nt
Where: A = New Balance, P = Principle, r = rate, n = number of periods per year and t = time

Principle = $350, Annual Interest Rate = 1.5%, t = 24 months, Compounded Quarterly

Select one:

a. Interest = $5.64 and New Balance = $355.64
b. Interest = $10.50 and New Balance = $360.50
c. Interest = $10 and New Balance = $360
d. Interest = $10.64 and New Balance = $360.64

Answer 1

Option answer:

d. Interest = $10.64 and New Balance = $360.64

Answer:

A = $360.64

A = P + I where

P (principal) = $350.00

I (interest) = $10.64

Calculation Steps:

First, convert R as a percent to r as a decimal

r = R/100

r = 1.5/100

r = 0.015 rate per year,

Then solve the equation for A

A = P(1 + r/n)nt

A = 350.00(1 + 0.015/4)(4)(2)

A = 350.00(1 + 0.00375)(8)

A = $360.64

Summary:

The total amount accrued, principal plus interest, with compound interest on a principal of $350.00 at a rate of 1.5% per year compounded 4 times per year over 2 years is $360.64.