Question

Find the amount of compound interest earned with a principal rate of $925, rate of 6%, compounded quarterly, for 8 years with a final amount of $1489.55

Answer 1

$564.55

Explanation:

#First, we determine the effective annual interest applicable given a 6% rate compounded quarterly:

`i_m=(1+i/m)^m-1\\\\=(1+0.06/4)^4-1\\\\=0.06136`

We know that interest earned is equal to the accumulated value minus the initial investment amount or principal.

-Given the final value is $1489.55 and the initial amount is $925, the interest earned is calculated as;

`I=A-P\\\\=1489.55-925\\\\=564.55`

Hence, the amount of interest earned is $564.55