Interest on interest, or compound interest, is the adding of interest to the principal sum of a loan or deposit. Mike's account balance after 21 years is $69,131.44.
What is compound interest?
Interest on interest, or compound interest, is the adding of interest to the principal sum of a loan or deposit. It's the outcome of reinvesting interest rather than paying it out so that interest is received on the principal plus previously collected interest in the next quarter.,
[tex]A = P(1+ \dfrac{r}{n})^{nt}[/tex]
where A is the final amount
P is the principal amount
r is the rate of interest
n is the number of times interest is charged in a year
t is the number of years
The principal amount that Mike invested is $29,000. The rate of interest is 7.24% compounded daily, for 21 years. Therefore, the account balance after 21 years is
[tex]\text{Account Balance after 21 years} = 29,000(1+\dfrac{0.0724}{365})^{(365 \times 21)}[/tex]
= $69,131.44
Hence, Mike's account balance after 21 years is $69,131.44.
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