Question

An investment of $6,599.20 earns 4.2% interest compounded monthly over 7 years. approximately how much interest is earned on the investment? a. $2,250.96 b. $4,308.21 c. $6,762.59 d. $8,850.20

Answer 1

The interest earned on the investment f $6,599.20 earns 4.2% interest compounded monthly is $2,250.96

Compound interest

The compound interest is the interest added on a sum of money invested over a period of time. The formula for calculating the compound interest is expressed as:

A = P(1+r/n)^nt

Given the following

P =  $6,599.20

r = 4.2%  = 0.042

n = 12 (monthly)

t = 7 years

Substitute

A =  6,599.20 (1+0.042/12)^7(12)
A =  6,599.20 (1.0035)^84
A= $8,850.20

Interest = $8,850.20 -  $6,599.20

Interest = $2,250.96

Hence the interest earned on the investment f $6,599.20 earns 4.2% interest compounded monthly is $2,250.96

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