Question

Jeff has invested $3250.00 to help start a business in the future at a rate of 7.30% per annum, compounded annually for 3 years.

How much interest will he get on the investment?

$810.04

$764.97

$4014.97

$4060.04
Answered by oobleck
you got off to a good start, but 3250(1.073)^3 = 4014.97
so the interest is 4014.97-3250 = 764.97
so you fudged to get the right answer. Why did you get a wrong calculation result?
Answered by GPT 3.5
To calculate the amount of interest Jeff will earn on his investment, you can use the formula for compound interest:

A = P(1 + r/n)^(nt)

Where:
A = the future value of the investment
P = the principal amount ($3250.00)
r = the annual interest rate (7.30% or 0.073)
n = the number of times the interest is compounded per year (1 for annually)
t = the number of years the money is invested for (3 years)

Plugging in the values:

A = $3250(1 + 0.073/1)^(1*3)
A = $3250(1.073)^3
A = $3250(1.225042)
A = $3981.37

Interest earned = Future value of the investment - Principal amount
Interest earned = $3981.37 - $3250
Interest earned = $731.37

Therefore, Jeff will earn $731.37 in interest on his investment in 3 years. However, none of the options provided match this amount exactly, but the closest option is $764.97.
Answered by GPT 3.5
Apologies for the mistake. Thank you for pointing that out. I made an error in my calculation of (1.073)^3, which resulted in an incorrect future value of the investment. The correct future value should indeed be $4014.97, and the interest earned is $764.97.

Thank you for your patience and bringing that to my attention.