Problema Solution
The compound interest on a $3,000.00 loan at 7% compounded annually. Use the table below to determine the interest at the end of 3 years.
Future Value of $1 (Points : 2)
Answer provided by our tutors
P = $3,000 the principal
r = 0.07 or 7% annual interest rate
m = 1 compounding period per year
i = r/m = 0.07/1 = 0.07 interest rate per period
t = 3 years
n = t*m = 3*1 = 3 total number of compounding periods
A = the future value (the amount in the account after 23 years)
A = P(1 + i)^n
A = 3000(1 + 0.07)^3
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A = $3,675.13
The interest is I = A - P:
I = $3,675.13 - $3,000
I = $675.13
The interest will be $675.13.