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2 % compound interest. how much interest will be paid on $400 earning 2% compounded quarterly after 4 y?

Sagot :

Compound interest formula:

[tex]CI=P(1+\frac{r}{n})^{nt}-P[/tex]

P is the principal

r is the interest rate in decimal form

n is the number of times interest is compounded

t is the time in years

For the given situation:

P= $400

r= 0.02

n= 4 (quarterly)

t=4

[tex]\begin{gathered} CI=400(1+\frac{0.02}{4})^{4\cdot4}-400 \\ \\ CI=400(1.005)^{16}-400 \\ \\ CI=33.23 \end{gathered}[/tex]

Then, the interest paid is $33.23

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