how do i figure out interest?

Question

Find the future value and also find the interest if $14,000 is invested at 2% compounded quarterly for 10 years.

Answer 1

Hello, thank you for taking the time to post your question!

The underlying formula that you want to use to solve for compound interest on this one is

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

On this one we have P = 14000, r = 0.02, n = 4, t = 10 … making the equation

A = 14000(1 + 0.02/4)^(4*10)

A = 17091.12

Meaning that the future value in this scenario is $17,091.12

For the interest then you can take

Interest = A – P = 17091.12 – 14000 = $3,091.12

I hope that helps you get moving in a better direction on this type of question! Feel free to reach out if you have any additional questions beyond that :)

Answer 2

The compound interest formula is

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

A = future amount

P = principal investment = $14,000

r = interest rate = 2/100 = .02

n = number of times compounded each year = 4

t = time in years = 10

 

A = 14000(1 + .02/4)⁴⁽¹⁰⁾

   = 14000(1.005)⁴⁰

   = 17091.12

 

The future amount (after 10 years ) is $17,091.12

 

The interest earned is the difference between the principal investment

and the future value:  I = A-P

I = 17091.12 - 14000

I = $3,091.12