When Lisa and Tom has their first child, they put $7,500 into a savings account that earns 6% compound interest. If Lisa and Tom did not add or remove anything from the savings account, how much interest will they have earned after 4 years?

Question

Mathematics

Ian Adams

19 October, 10:48

When Lisa and Tom has their first child, they put $7,500 into a savings account that earns 6% compound interest. If Lisa and Tom did not add or remove anything from the savings account, how much interest will they have earned after 4 years?

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Answers (1)

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Whitney · Answer 1

Step-by-step explanation:

We would apply the formula for determining compound interest which is expressed as

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

Where

A = total amount in the account at the end of t years

r represents the interest rate.

n represents the periodic interval at which it was compounded.

P represents the principal or initial amount deposited

From the information given,

P = $7500

r = 6% = 6/100 = 0.06

Assuming the interest was compounded annually, then

n = 1 because it was compounded once in a year.

t = 4 years

Therefore,

A = 7500 (1 + 0.06/1) ^1 * 4

A = 7500 (1.06) ^4

A = $9468.6

The interest that they would have earned after 4 years is

9468.6 - 7500 = $1968.6