Question

Home city bank pays 5% interest compounded quarterly on regular savings accounts. Miguel cardosa deposited 1000 for 1 year. He made no other deposits or withdrawals. How much interest did he earn during the year.

Answer 1

Answer:

The interest earned was $50.95

Step-by-step explanation:

we know that    

The compound interest formula is equal to  

$A=P(1+\frac{r}{n})^{nt}$  

where  

A is the Final Investment Value  

P is the Principal amount of money to be invested  

r is the rate of interest  in decimal

t is Number of Time Periods  

n is the number of times interest is compounded per year

in this problem we have  

$t=1\ year\\ P=\ 1,000\\ r=5\%=5/100=0.05\\n=4$  

substitute in the formula above

$A=1,000(1+\frac{0.05}{4})^{4*1}$  

$A=1,000(1.0125)^{4}$  

$A=\ 1,050.95$  

Find the interest earned I

we know that

$I=A-P$

substitute the values

$I=\ 1,050.95-\ 1,000=\ 50.95$