Meghan deposited $2,500in an account at a bank that pays 16% compounded quarterly. Use the compound interest table to find the interest earned on the investment after 2 years.
a. $921.43
b. $204
c. $2,704
d. $3,421.43
**This is a sample question** (Please Help!)
To find the interest earned on Meghan's investment after 2 years, we need to use the compound interest formula:
A = P(1 + r/n)^(nt)
Where:
A = the total amount after interest
P = the principal amount (original deposit)
r = the annual interest rate (in decimal form)
n = the number of times interest is compounded per year
t = the number of years
In this case, Meghan deposited $2,500, the interest rate is 16% (or 0.16), it is compounded quarterly (4 times per year), and she invested for 2 years.
First, let's calculate what's inside the parentheses: (1 + r/n)^(nt)
(1 + 0.16/4)^(4*2) = (1 + 0.04)^8
Next, we can substitute this value back into the compound interest formula:
A = $2,500 * (1 + 0.04)^8
Now, we can use the compound interest table to find the value of (1 + 0.04)^8, which is approximately 1.360.
A ≈ $2,500 * 1.360
A ≈ $3,400
Therefore, the interest earned on the investment after 2 years is approximately $3,400 - $2,500 = $900.
None of the provided answer options match the calculated interest of $900, so it seems there may be an error in the answer choices.
i = .16/4 = .04
n = 4(2) = 8
amount = 2500(1.04)^8 =3421.42
your textbook still has tables???
how old is this?