Question

On February 1, 2018, John deposited $3,850 in a savings account that pays annual interest of 3.0% compounded quarterly. If he made no other deposits or withdrawals in the account, what interest would he earn by keeping his money on deposit until February 1, 2023?

Answer 1

Answer:

$620 (cor to 3 sig. fig.)

Step-by-step explanation:

Interest

=$3850[(1+$\frac{3%}{4}$)⁵⁽⁴⁾-1]

=$620 (cor to 3 sig. fig.)

Answer 2

Answer:

The interest would be $ 620.56

Step-by-step explanation:

Since, the amount formula in compound interest,

$A=P(1+\frac{r}{n})^{nt}$

Where,

P = principal amount,

r = annual rate of interest,

n = number of compounding periods in a year,

t = number of years,

Here, P = $3,850, r = 3% = 0.03, n = 4 ( number of quarters in a year ),

Number of years from February 1, 2018 to February 1, 2023, t = 5 years,

Thus, the amount in February 1, 2023,

$A=3850(1+\frac{0.03}{4})^{20}$

$=3850(1+0.0075)^{20}$

$=3850(1.0075)^{20}\approx \ 4470.56$

Hence, the amount of interest,

$I=A-P=4470.56 - 3850=\ 620.56$

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