In Example 6.2.3, Donovan started placing $75 per month into an annuity savings plan that earned 1.5% APR compounded Monthly. The future value of his account after 10 years was $9703.52. How much of the final amount was a result of earned interest? Enter your answer without a dollar sign or comma. For example, 9703.52

Answer 1

To find out how much of the final amount of $9703.52 was earned from interest, we first need to calculate the total amount that Donovan contributed to the annuity savings plan over the 10 years.

1. Calculate the total contributions:

   • Monthly contribution = $75
   • Number of months in 10 years = 10 years × 12 months/year = 120 months

   Total contributions = Monthly contribution × Number of months \[ \text{Total contributions} = 75 \times 120 = 9000 \]

2. Calculate the earned interest:

   • Future value of the account = $9703.52
   • Total contributions = $9000

   Earned interest = Future value - Total contributions \[ \text{Earned interest} = 9703.52 - 9000 = 703.52 \]

Thus, the amount of the final amount that was a result of earned interest is \(703.52\).