Answer:
We conclude that the total amount accrued, principal plus interest, from compound interest on an original principal of $2500 at a rate of 5% per year compounded 6 times per year over 8 years is $3723.38.
Step-by-step explanation:
Given
Principle P = $2500
Interest rate r = 5% = 0.05
Time period t = 8 years
To determine
Accrue Amount A = ?
Using the compound interest equation
[tex]A\:=\:P\left(1\:+\:\frac{r}{n}\right)^{nt}[/tex]
where:
A represents the Accrue Amount
P represents the Principal Amount
r represents the interest rate
t represents the time period in years
n represents the number of compounding periods per unit t
Important tip:
now substituting P = 2500, r = 0.05, t = 8 and n = 6 in the equation
[tex]A\:=\:P\left(1\:+\:\frac{r}{n}\right)^{nt}[/tex]
[tex]A=2500\left(1+\frac{0.05}{6}\right)^{\left(6\right)\left(8\right)}[/tex]
[tex]\:A=2500\left(1+\frac{0.05}{6}\right)^{48}[/tex]
[tex]A=2500\times 1.48935[/tex] ∵ [tex]\left(1+\frac{0.05}{6}\right)^{48\:\:}=1.48935[/tex]
[tex]A=\:3723.38[/tex] $
Therefore, we conclude that the total amount accrued, principal plus interest, from compound interest on an original principal of $2500 at a rate of 5% per year compounded 6 times per year over 8 years is $3723.38.
