Question

5.
Find the interest earned. Assume 3.5% interest compounded daily.
$975 deposited April 23 and withdrawn June 18


$6.66

$5.25

$5.16

$6.75

Answer 1

Principal Amount = P = $975
Interest rate = r = 3.5% = 0.035
Compounding periods in a year = n = 365
Time in days = Number of days from April 23 to June 18 = 56
Time in years= t = 56/365
Interest Earned = ?

First we need to calculate the amount accumulated (A) over 56 days period.

$A =P(1+ \frac{r}{n})^{t*n} \\ \\ A=975(1+ \frac{0.035}{365})^{365* \frac{56}{365} } \\ \\ A=980.25$

Thus, the amount accumulated will be $980.25

Interest Earned = Amount accumulated - Principal Amount
Interest Earned = 980.25 - 975 = $ 5.25

Thus, $5.25 will be earned as interest in the given 56 days period.