Malik deposited $2,439 in an account earning 7% interest compounded annually.
To the nearest cent, how much interest will he earn in 3 years?
$
To find the interest earned, we use the formula:
A = P(1+r/n)^(nt)
Where:
A = the final amount
P = the principal (initial amount)
r = the annual interest rate (expressed as a decimal)
n = the number of times the interest is compounded per year
t = the number of years
In this case, the principal (P) is $2,439, the annual interest rate (r) is 7% or 0.07, the interest is compounded annually (n = 1), and the number of years (t) is 3.
Using the formula:
A = $2,439(1+0.07/1)^(1*3)
A = $2,439(1+0.07)^3
A = $2,439(1.07)^3
A ≈ $2,439(1.225043)
A ≈ $2,985.39
The interest earned would be the final amount minus the principal:
Interest = $2,985.39 - $2,439
Interest ≈ $546.39
To the nearest cent, Malik will earn approximately $546.39 in interest in 3 years.