Question

Sarah invests $5,000 in an account that earns 3.5% annual interest compounded quarterly.
She leaves the money in the account for 75 months, and does not make any deposits or
withdrawals.
How much interest does the account earn in 75 months?
(1 point)
The account earns $
in interest.

Answer 1

t = 75 months = 75/12 = 6.25 years. Quarterly compounding: n = 4, so number of periods = 4(6.25) = 25.

A = 5000(1 + 0.035/4)^{25} = 5000(1.00875)^{25} ≈ $6,218.10.

Interest = A − 5000 ≈ $1,218.10.