##### Math question help needed

label Accounting
account_circle Unassigned
schedule 1 Day
account_balance_wallet \$5

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)

Jun 3rd, 2015

\$540 Pays 4.2% Annually

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

Jun 3rd, 2015

...
Jun 3rd, 2015
...
Jun 3rd, 2015
Oct 19th, 2017
check_circle