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An investment of $2,000 is earning interest at the rate of 6.2% compounded quarterly over 5 years. Approximately how much interest is earned on the investment?

a.

$724.67

b.

$2127.72

c.

$720.37

d.

$2720.37

Verified Answer :

Aliwohaish12

A=2,000×(1+0.062÷4)^(4×5)
A=2,720.37
Interest earned 2720.37-2000=720.37

InesWalston

Answer:

C.  $720.37

Step-by-step explanation:

An investment of $2,000 is earning interest at the rate of 6.2% compounded quarterly over 5 years.

We know that,

\(A=P\left(1+\dfrac{r}{n}\right)^{n\cdot t}\)

here,

A = Future amount,

P = Principal = $2000

r = Rate of interest = 6.2% = 0.062

n = Number of period = 4 (as compounded quarterly)

t = time period = 5 years

Putting the values,

\(A=2000\left(1+\dfrac{0.062}{4}\right)^{4\cdot 5}\)

\(=2000\left(1+0.0155\right)^{20}\)

\(=2000\left(1.0155\right)^{20}\)

\(=\$2720.37\)

So the interest will be,

\(=\text{Future amount}-\text{Principal}\)

\(=2720.37-2000=\$720.37\)

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