Question

Lola has $7,403 in a savings account. The interest rate is1191100%, compounded annually.To the nearest cent, how much interest will she earn in 4 years?

Answer 1

Given:

P = $7,403

r = 11% = 0.11

compounded annually ⇒ n = 1

Time = t = 4 years

We will find the interest earned using the following formula:

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

Substitute with the given data:

$\begin{gathered} I=7403\cdot(1+\frac{0.11}{1})^{1\cdot4}-7403 \\ I=7403\cdot1.11^4-7403 \\ I=7403\cdot(1.11^4-1)\approx3835.2752 \end{gathered}$

Rounding the answer to the nearest cent

So, the answer will be The interest earned = $3,835.28