Question

$10,000 is deposited into a savings account that earns 3% per annum compounded quarterly.

(a) How much interest will be credited in the second month?

(b) How much interest will be credited in the second year?

Answer 1

Given pirncipal amount $10,000 and interest rate 3%

compounded 4 times per year

a) interest credited in the second month

compounded interest formula

A=P(1+ )^nt

^A=AMOUNT

^{P=PRINCIPAL p=$ 10,000}

^{r=rate of interest r=3%}

^{n=no of times compounding per annum n=4}

t=time

=

=10050.04

THEREFORE INTEREST = 10000-10050.04=50.04

INTEREST =50.04

B)INTEREST CREDIT IN THE SEOCND YEAR

compounding for annum 4 times n =4

t=2

=10000*1.0616

=10,615.6

therefore interest =10615.6-10000=615.6