Question

If $16,000 is invested in an account for 15 years. Calculate the total interest earned at the end of 15 years if the interest is:

(a) 5% simple interest: $

(b) 5% compounded annually: $

(c) 5% compounded quarterly: $

(d) 5% compounded monthly: $

Round your answers to the nearest cent.

Answer 1

a) Simple Interest = ptr = 16000 * 15 * 5/100 = 12000

b) A = P(1 + r)^t

        = 16000(1 + 5/100)¹⁵

       = 16000(105/100)¹⁵

       = 33262.85

CI = A - P

     = 33262.85 - 16000

     = 17262.85

C) A = P(1 + r/n)^nt

        = 16000(1 + 5/400)^{4 * 15}

       = 16000(405/400)⁶⁰

       = 33714.902

CI = A - P

     = 33714.902 - 16000

     = 17714.902

d) A = P(1 + r/n)^nt

        = 16000(1 + 5/1200)^{12 * 15}

       = 16000(1205/1200)¹⁸⁰

       = 33819.263

CI = A - P

     = 33819.263 - 16000

     = 17819.263