Question

The fitness center needs $125,000 in five years for more workout machines. Find the total interest earned if payments are made at the end of each quarter with interest at 6% compounded quarterly.

Answer 1

$38,562.5

Explanation

Using the compound interest formula

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

P is the principal = $125,000

r is the rate = 6% = 0.06

time t = 5years

n = 0.25 (quarterly payment)

Substitute

A = 125000(1+0.06/0.25)^5(0.25)

A = 125000(1+ 0.24)^1.25

A = 125000(1.24)^1.25

A = 125000(1.3085)

A = 163,562.5

Hence the interest earned = 163,562.5 - 125000

interest earned = $38,562.5