How much compound interest is earned on $4300 at 2.9% interest for 10 years, compounded quarterly? Give your answer in dollars and cents. Don’t forget to subtract P from A.

Compound Interest

Question

How much compound interest is earned on $4300 at 2.9% interest for 10 years, compounded quarterly? Give your answer in dollars and cents. Don’t forget to subtract P from A.
 
Compound Interest

anonymous · Answer

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wolf1728 · Answer

Total Amount = Principal * (1 + rate/number cmpdg periods)^n*t Total Amount = 4,300 * (1 + .029/4)^4*10 Total Amount = 4,300 * (1.00725)^40 Total Amount = 4,300 * 1.3350300535 Total Amount = 5740.6292299865 Rounds to 5740.63 Calculator to test the answer: http://www.1728.org/compint.htm

anonymous · Answer

im sorry but i dont get it :(

wolf1728 · Answer

Gee, I followed the formula you posted.
Guess I'll explain some more.

wolf1728 · Answer

The first thing is to calculate the quarterly compounded rate after 10 years compounding

(1 + rate/4) ^ 4*10

do you understand that?

wolf1728 · Answer

The rate is 2.9% but to use it in a formula we need to use it as .029

anonymous · Answer

ohhh okay, i guess i just needed it broken down?

wolf1728 · Answer

Total = Principal * (1 + .029/4) ^ 4 *10

anonymous · Answer

and it equals 5740.63

wolf1728 · Answer

Yes it does!

wolf1728 · Answer

Do you see why we need to convert the 2.9 % to .029?

anonymous · Answer

yes I do! thanks for explaining

wolf1728 · Answer

okay You are welcome :-)