If you have a bank account with a beginning principal of $8000, how much interest would you earn after 5 years for 7%?
To calculate the interest earned after 5 years at a rate of 7%, you can use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = the final amount (including interest)
P = the principal amount (starting balance)
r = annual interest rate (as a decimal)
n = number of times interest is compounded per year
t = number of years
In this case, the principal amount (P) is $8000, the annual interest rate (r) is 7% (or 0.07 as a decimal), and the number of years (t) is 5. We are not given the number of times interest is compounded per year (n), so we will assume it is compounded annually (n = 1).
Using the formula:
A = 8000(1 + 0.07/1)^(1*5)
A = 8000(1 + 0.07)^5
A = 8000(1.07)^5
A ≈ 8000(1.40255)
A ≈ $11,220.40
To calculate the interest earned, subtract the principal amount from the final amount:
Interest = A - P
Interest = $11,220.40 - $8000
Interest ≈ $3220.40
Therefore, after 5 years at a 7% interest rate, you would earn approximately $3220.40 in interest.