Compound Interest, SMB-017

Ekamjot invests $13 000 for two years.

Interest is calculated at the rate of 7.2% per annum, compounding quarterly.

How much interest does Ekamjot earn from this investment, giving your answer to the nearest cent? (2 marks)

--- 4 WORK AREA LINES (style=lined) ---

Show Answers Only

`$1994.28`

Show Worked Solution

`text{Annual interest rate}\ = 7.2% = 0.072`

`text(Quarterly interest rate)\ (r) = \frac{0.072}{4} = 0.018`

`text(Compounding periods)\ (n) = 2 xx 4 =8`

`text{Interest earned}\ =14\ 994.28-13\ 000=$1994.28`