The formula to calculate compound interest is: A = P(1 + r/n)^(nt), where:
A = the future value of the investment
P = the principal amount (initial investment)
r = annual interest rate (as a decimal)
n = number of times interest is compounded per year
t = number of years
In this case, the principal amount (P) is $4,300, the annual interest rate (r) is 3.7% (or 0.037 as a decimal), the number of times interest is compounded per year (n) is 4 (quarterly), and the number of years (t) is 20.
Using the formula:
A = 4300(1 + 0.037/4)^(4*20)
A ≈ 4300(1 + 0.00925)^(80)
A ≈ 4300(1.00925)^(80)
A ≈ 4300(2.208682296)
A ≈ $9,505.39
The interest amount is A - P, so the interest amount is:
$9,505.39 - $4,300 = $5,205.39
None of the given answer choices match this calculated amount of interest.
Calculate the interest amount of a $4,300 investment for a period of 20 years with a compound interest rate of 3.7% compounded quarterly.
a $4,702.27
b $4,712.18
c $4,681.92
d $8,891.92
1 answer