The formula to calculate the compound interest is:
A = P(1 + r/n)^(nt)
Where:
A = the future value of the investment/loan, including interest
P = the principal investment amount (15,000)
r = annual interest rate (5% or 0.05)
n = number of times that interest is compounded per year (12 for monthly)
t = time the money is invested for in years (7)
Plugging in the values:
A = 15,000(1 + 0.05/12)^(12*7)
A = 15,000(1 + 0.00416666667)^84
A = 15,000(1.00416666667)^84
A = 15,000(1.477458833)
A = 22,161.88
To find the interest earned, we subtract the principal from the future value:
Interest = 22,161.88 - 15,000 = $7,161.88
Therefore, the interest earned if interest is compounded monthly is $7,161.88.
Suppose that $15,000 is deposited for seven years at 5% APR. Calculate the interest earned if interest is compounded monthly. Round your answer to the nearest cent.
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