Question

2.Jim opens a savings account with $22,500. His account pays 3.5% interest compounded yearly. At the end of 5.5 years, Jim closes the account. How much interest does he earn? What is the total value of his account when he closes it?

Answer 1

Given:

Jim opens a savings account with $22,500. His account pays 3.5% interest compounded yearly.

Required:

How much interest does he earn? What is the total value of his account when he closes it?

Explanation:

We know the formula for the compound interest

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

Now, we have P = $22,500, r = 0.035 and time = 5.5 years

$\begin{gathered} A=P(1+\frac{r}{n})^{nt} \\ A=22500(1+0.035)^{5.5} \\ A=22500(1.035)^{5.5} \\ A=27186.57 \end{gathered}$

Answer:

Interest he earns = 27186.57 - 22500

= 4686.57

Total value of his account = 27186.57