Question

How do I solve this problem using compound interest?

Answer 1

1. $40,881.21
2. $41,058.95
3. $41,099.87
4. $41,115.75
5. $41,119.85

Explanation:

`33000 xx 1.055^4=40881.21347`=$40,881.21

We use this formula for each question. The 33000 does not change as this is the original sum of money. The power 4 will change to the number of times the interest is calculated. Once a year for four years is 4. Quarterly is 4 times a year for four years is 16 and so on. The 1.055 is 5.5% added to 100`=>105.5` then

divided by 100`=> 105.5/100=1.055`. To work out the quarterly we divide 5.5% by 4, then add 100 and then divide by 100

`=>` `((5.5/4)+100)/100=811/800`