Question

What interest will be earned if $6600 is invested for 8 years at 12% compounded monthly? (Round your answer to the nearest cent.) $

Answer 1

The compound interest formula used is

P = principal amount (the initial amount invested)

r = annual rate of interest (as a decimal)

t = number of years the amount is invested for.

A = amount of money accumulated after n years, including interest.

n = number of times the interest is compounded per year . ( if compounded monthly then n=12)

we are given that

P=$ 6600

r= 0.12 ( 12% means 12/100 i.e. 0.12)

t= 8

n=12 ( compounded monthly)

NOW, we first calculate A using the formula i.e. the final amount !

Hence, the accumulated amount is $17155.2013

and the interest earned will be (A-P) i.e. we subtract the initial amount invested to find the amount of interest earned .

hence, interest earned = $ (17155.2013 - 6600)

i.e. interest earned = $ 10,555.2013

rounding to nearest cent means rounding to hundredths (2 decimals) place

thus, answer is $ 10,555.20

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