Find the interest earned if RM 7500 is invested for 6 years at 6.4% compounded quarterly.
7500(1 + .064/4)^(4*6) - 7500
To find the interest earned, we can use the compound interest formula:
A = P(1 + r/n)^(nt)
Where:
A = the future value of the investment (including interest)
P = the principal amount invested (RM 7500)
r = annual interest rate (6.4% or 0.064)
n = number of compounding periods per year (quarterly, so n = 4)
t = number of years (6 years)
Let's calculate it step by step:
First, convert the annual interest rate to quarterly rate by dividing it by the number of compounding periods per year:
0.064 / 4 = 0.016
Now, substitute the values into the compound interest formula:
A = 7500(1 + 0.016)^(4*6)
Next, simplify the formula:
A = 7500(1.016)^(24)
Now, calculate the value inside the parentheses:
1.016^24 ≈ 1.440340476
Multiply that with the principal amount:
A ≈ 7500 * 1.440340476
The future value A is approximately RM 10,802.55.
To find the interest earned, subtract the principal amount from the future value:
Interest Earned = A - P
Interest Earned = 10,802.55 - 7500
Interest Earned ≈ RM 3,302.55
Therefore, the interest earned is approximately RM 3,302.55.