Final answer:
The total amount after 2 years with compound interest is $2,232.06, and the compound interest earned over the 2 years is $232.06.
Step-by-step explanation:
To find the amount and compound interest Ed Cure invested $2,000 at 5.5% interest compounded quarterly for 2 years, we need to use the formula for compound interest:
A = P(1 + r/n)(nt)
Where:
A = the future value of the investment/loan, including interest
P = the principal investment amount ($2,000)
r = the annual interest rate (decimal) (5.5%/100 = 0.055)
n = the number of times that interest is compounded per year (quarterly = 4)
t = the number of years the money is invested or borrowed for (2 years)
Now, we compute the future value:
A = $2,000(1 + 0.055/4)(4*2)
A = $2,000(1 + 0.01375)8
A = $2,000(1.01375)8
A = $2,000(1.116029)
A = $2,232.06
The total future amount with compound interest is $2,232.06. To find the compound interest, subtract the original principal from the total amount:
Compound Interest = A - P
Compound Interest = $2,232.06 - $2,000
Compound Interest = $232.06
The compound interest earned over the 2 years is $232.06.