Initial deposit of $1100.00 on June 1. APR of 2.0%. What is the amount of interest earned on December 31? What is new balance?
To calculate the amount of interest earned and the new balance on December 31, we need to know the compounding period for the APR (Annual Percentage Rate). The compounding period determines how often the interest is calculated and added to the initial deposit.
Let's assume that the interest is compounded annually, which means it is calculated and added once a year. With an APR of 2.0%, the interest rate per compounding period is 2.0%.
To calculate the interest earned:
1. Convert the APR to a decimal: 2.0% = 0.02
2. Multiply the initial deposit by the decimal interest rate: $1100.00 * 0.02 = $22.00
Therefore, the interest earned on December 31 is $22.00.
To calculate the new balance:
1. Add the interest earned to the initial deposit: $1100.00 + $22.00 = $1122.00
Therefore, the new balance on December 31 is $1122.00.