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

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