Problema Solution
An investment of $8,350 earns 5.2% interest compounded monthly over 10 years. Approximately how much interest is earned on the investment?
Answer provided by our tutors
P = $8,350 the principal (the money deposited)
r = 0.052 or 5.2% annual interest rate
t = 10 years
m = 12 compounding period per year
i = r/m = 0.052/12 = 0.013/3 interest rate per period
n = t*m = 10*12 = 120 total number of compounding periods
A = future value
A = P(1 + i)^n
A = 8350(1 + 0.013/3)^120
A = $14,029.16
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I = A - P
I = 14029.16 - 8350
I = $5,679.16
there are $5,679.16 interest earned on the investment.