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Mathew deposits 400800.00 kina with the bank which offers 5½% interest per annum. calculate the interest earned after four years if it is compounded every three months?

Respuesta :

Solution

For this case we can use the following formula:

[tex]A=P(1+\frac{r}{n})^{nt}[/tex]

Where:

P= 400800 = present value

A= future value

r= 0.055 interest rate

n= 4, number of times that the interest is compund in a year (quarterly)

t= 4 years

Replacing we got:

[tex]A=400800(1+\frac{0.055}{4})^{4\cdot4}=498679.58[/tex]

then the interest would be:

[tex]I=A-P=498679.58-400800=97879.58[/tex]