Interest problems

Question

Joshua puts $8,765 in a 10 year 5.28% savings certificate in which interest is compounded quarterly. how much interest does he earn in the second year, the fourth year, the seventh year, and the 10th year?

Answer 1

An easy way to solve this problem is to develop a table in a spreadsheet, from inception of the investment to its maturity. 

 

1.. 8765.00 ..115.698.. 8880.70
2 ..8,880.70 ..117.23.. 8,997.92
3 ..8,997.92 ..118.77 ..9,116.70
4 ..9,116.70 ..120.34 ..9,237.04
5 ..9,237.04 ..121.93 ..9,358.97
6 ..9,358.97 ..123.54 ..9,482.50
7 .. etc.

 

Then just add up the interest for each year For example, in the first year interest earned was 42.04 and in the secon year it is 497.46

 

I tutor students on this subject. It is important that you understand compound interest of single investments and annuities. They will be with you for the rest of your life.