$4500 for 3 years at 3.9% compounded monthly

Question

Use the compound interest formula to compute the total amount accumulated and the interest earned.

Answer 1

the underlying formula that you want to use to solve this one is

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

for this scenario that means taking

A = 4500(1 + 0.039/12)^(12*3)

A = 4500(1 + 0.00325)^36

A = 5057.58

meaning that interest earned is $557.58

Answer 2

3.9% = 0.039

 

P * (1 + r)^t

 

P is the principal amount of $4500

 

r is the interest rate of 3.9% = 0.039

 

t is the time of 3 years

 

4500 * (1 + 0.039)^3 = 4500 * (1.039)^3 = 5047.30