Chapter 6, Problem 50CR

To determine

To calculate the total amount if the interest is compounded annually.

Answer to Problem 50CR

$4434.87

Explanation of Solution

Given:

Principal: $4000

Rate of interest: 3.5%

Time: 3 years

Formula used:

Compound interest $,I=P{\left(1+\frac{r}{100}\right)}^n$

Calculation:

Using the compound interest formula and substituting the known values,

  $\begin{array}{l}I=P{\left(1+\frac{r}{100}\right)}^n\\ I=4000{\left(1+\frac{3.5}{100}\right)}^3\\ I=4000{\left(1+0.035\right)}^3\\ I=4000{\left(1.035\right)}^3\\ I=4000\left(1.108717875\right)\\ I=4434.8715\end{array}$

Rounding off to the nearest cent, the compound interest is,

  $I=4434.87$

Conclusion:

Therefore, the total amount of compound interest is $4434.87.