calculate the interest amount of a 4,300 investment for a period of 20 years with a compound interest rate of 3.7% compound quarterly
To calculate the interest amount of a $4,300 investment for a period of 20 years with a compound interest rate of 3.7% compounded quarterly, we can use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = the future value of the investment
P = the principal amount (initial investment)
r = the interest rate (annual percentage rate)
n = the number of times that interest is compounded per year
t = the number of years
In this case, the principal amount is $4,300, the interest rate is 3.7% (or in decimal form, 0.037), the interest is compounded quarterly (so n = 4), and the time period is 20 years.
Using the formula, we can calculate the future value (A):
A = 4300(1 + 0.037/4)^(4*20)
A = 4300(1 + 0.00925)^(80)
A = 4300(1.00925)^(80)
A ≈ 4300(1.974015)
A ≈ $8,492.65
To find the interest amount, we subtract the principal amount from the future value:
Interest amount = A - P
Interest amount = $8,492.65 - $4,300
Interest amount ≈ $4,192.65
Therefore, the interest amount of a $4,300 investment for a period of 20 years with a compound interest rate of 3.7% compounded quarterly is approximately $4,192.65.