Question

Precalculus

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F.17 Compound interest: word problems 2WU
Ronnie opened a Savings account and deposited $800.00 as principal. The account earns 1%
interest, compounded monthly. How much interest will he earn after 3 years?
Round your answer to the nearest cent.

Answer 1

$24.35

Explanation:

We will use the compound interest formula provided to solve this problem:

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

P = initial balance

r = interest rate (decimal)

n = number of times compounded annually

t = time

First, change 1% into a decimal:

1% ->
`(1)/(100)` -> 0.01

Since the interest is compounded monthly, we will use 12 for n. Lets plug in the values now:

`A=800(1+(0.01)/(12))^(12(3))`

`A=824.35`

Lastly, subtract A from the principal to get the interest earned:

`824.35 - 800 = 24.35`