Question

If 12,025 was invested at 3.25% compounded monthly 3 years, how much interest will be earned

Answer 1

$1,229.75

Explanation:

Lets use the compound interest formula provided to solve this:

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

P = initial balance

r = interest rate (decimal)

n = number of times compounded annually

t = time

First, change 3.25% into a decimal:

3.25% ->
`(3.25)/(100)` -> 0.0325

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

`A=12,025(1+(0.0325)/(12))^(12(3))`

`A=13,254.75`

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

`13,254.75 - 12,025 = 1,229.75`