You have $540 in an account which pays 4.2% compounded
annually. How many additional dollars of interest would you earn over 4 years
if you moved the money to an account earning 6.6%? (Round
to the nearest Cent)

Thank you for the opportunity to help you with your question!

$540 Pays 4.2% Annually

what about a 6.6% interest

The formula for annual compound interest is A = P (1 + r/n) ^ nt:

Where:

A = the future value of the investment/loan, including interest P = the principal investment amount (the initial deposit or loan amount) r = the annual interest rate (decimal) n = the number of times that interest is compounded per year t = the number of years the money is invested or borrowed for

P=$540

r=4.2%=0.042

n=1

t=4

A=540(1+0.042)^4

A=540 * 1.042^4

A= 540 *
1.178883

A=$
636.5971

For A rate of 6.6%

P=$540

r=6.6%=0.066

n=1

t=4

A=540(1+0.066)^4

A=540 * 1.066^4

A= 540 *
1.291305

A=$
697.3047

Get the difference

= $697.3047-
$636.5971

=$
60.7076

Round of to the nearest Cents

=$60.7

Please let me know if you need any clarification. I'm always happy to answer your questions.

Jun 3rd, 2015

Are you studying on the go? Check out our FREE app and post questions on the fly!