Problema Solution
An investment of $1,000 is earning interest at the rate of 3.8% compounded daily over 3 years. Approximately how much interest is earned on the investment?
Answer provided by our tutors
P = $1,000
t = 3 years
r = 3.8% = 0.038
m = 360 compounding periods per year
n = m*t = 360*3 = 1080
i = r/m = 0.038/360
A = the future (maturity) value
I = A - P the interest
I = P(1 + i)^n - P
I = P((1 + i)^n - 1)
I = 1000((1 + 0.038/360)^1080 - 1)
I = $120.75
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there is $120.75 interest earned on the investment.