Calculating Compound Amount and Interest Earned on CD Deposit
What is the compound amount and amount of interest earned on a $5000 deposit at 1.36% compounded semiannually for 3 years?
Calculate the compound amount and interest earned based on the given details.
Answer:
The compound amount is $5446.98 (rounded to the nearest cent) and the interest earned is $446.98 (rounded to the nearest cent).
To calculate the compound amount and the amount of interest earned, we can use the following formula:
A = P(1 + r/n)^(n*t) - P
Where:
A = the compound amount
P = the principal (initial amount) of the deposit
r = the annual interest rate (as a decimal) of the deposit
n = the number of times the interest is compounded per year
t = the time period (in years) of the deposit
Given data:
Principal (P) = $5000
Annual interest rate (r) = 1.36% = 0.0136
Number of compounding periods per year (n) = 2 (compounded semiannually)
Time period (t) = 3 years
Calculations:
Compound amount (A):
A = 5000(1 + 0.0136/2)^(2*3) - 5000 = $5446.98 (rounded to the nearest cent)
Interest earned:
The interest earned can be found by subtracting the principal amount from the compound amount:
Interest earned = Compound amount - Principal amount
Interest earned = $5446.98 - $5000 = $446.98 (rounded to the nearest cent)
Therefore, the compound amount on the $5000 deposit at 1.36% compounded semiannually for 3 years is $5446.98 and the interest earned is $446.98.