Here we do not know the initial investment, P.
We can still apply the formula to solve for it since we know the future value = $44800.
From
FV=44800=P(1+0.028/365)^(23*365)
we solve for P
P=44800/((1+0.028/365)^(23*365))
=23528.98
The interest earned is therefore
FV-PV=$21271.02
Note: since it is daily interest, the number of days in a year can be important, considering leap years. To calculate to that precision, we need to know from which year to which year, hence the number of leap years. However, the difference will be much less than one cent, so it does not really make a difference for this problem.
Determine the interest earned for a 23-year investment with an interest rate of 2.8% compounded daily, if the Future Value is $44800
A) 21 271.02 B) 208.60 C) 20 955.11 D) 20 409.95
1 answer
1 answer