Question

Interest 600$ invested at6% compounded annually for 7 years

Answer 1

The interest earned is $302.18

Explanation:

Compound Interest

It occurs when the interest is reinvested rather than paying it out. Interest in the next compound period is earned on the principal sum plus previously accumulated interest.

The formula is:

`{\displaystyle A=P\left(1+{\frac {r}{n}}\right)^(nt)}`

Where:

A = final amount

P = initial principal balance

r = interest rate

n = number of times interest applied per time period

t = number of time periods elapsed

The investment described in the question is of P=$600 at a rate of r=6%=0.06 for t=7 years compounded annually. The compounding period coincides with the time of interest rate, thus n=1.

Applying the formula:

`{\displaystyle A=600\left(1+{\frac {0.06}{1}}\right)^(1*7)}`

`{\displaystyle A=600\left(1.06}\right)^(7)}`

A = $902.18

The interest is:

I = A - P = $902.18 - $600 = $302.18

The interest earned is $302.18