BUSINESS, FUR1 2002 VCAA 3 MC

Kuong invests `$8500` at `text(6%)` interest per annum, compounding quarterly.
The amount of interest he earns during the fourth year of the investment is

A. $521.59

B. $623.62

C. $2231.05

D. $2286.38

E. $4489.32

Show Answers Only

`B`

Show Worked Solution

`text(Using)\ \ A = PR^n`

`text(After 3 years,)\ P`	`= 8500`
`R`	`= 1 + 6/(4 xx 100)`
	`= 1.015`
`n`	`= 3 xx 4`
	`= 12`

`A`	`= 8500 xx 1.015^(12)`
	`= $10\ 162.754…`

` text(After 4 years,)\ n = 4 xx 4 = 16`

`A`	`= 8500 xx 1.015^(16)`
	`= $10\ 786.377…`

`text(Interest in)\ 4^text(th)\ text(year)`	`= 10\ 786.377 − 10\ 162.754`
	`= $623.62`

`=> B`