Im stuck... can ne one help me please? (1 Viewer)

[shayla]

Im stuck doing revision for my Maths tutor. Heres the question:

Cade invested the $5000 he won on the soccer pools in a term deposit for three months. Hisinvestment pays interest at 9.6% pa compounding monthly and the interest is credited to the account each month.

a) How muchinterest be credited to Cade`s account at the end of the first month?

Could someone please either show/tell/guide me through how this question is worked out please, if it isnt too much trouble?

thanks

Hannah

 

[PC]

Cade invested the $5000 he won on the soccer pools in a term deposit for three months. His investment pays interest at 9.6% pa compounding monthly and the interest is credited to the account each month.
(a) How much interest be credited to Cade`s account at the end of the first month?

Since the interest is compounded monthy, we need to change the interest rate from 9.6% p.a. to 0.8% per month (divide by 12).

So at the end of the first month, Cade will get 0.8% of his current balance, which is $5000.

Interest = 5000 x 0.08/100 = $4

That's it.

You can go on with the question...

Balance at end of 1st month = 5000 + 4 = $5004

Interest at end of 2nd month = 5004 x 0.08/100 = $4.0032 = $4
Balance at end of 2nd month = 5004 + 4 = $5008

Interest at end of 3rd month = 5008 x 0.08/100 = $4.0064 = $4.01
Balance at end of 3rd month = 5008 + 4.01 = $5012.01

.: Total interest = $12.01

Or using the compound interest formula:
A = 5000 (1 + 0.0008)³
= 5000(1.0008)³
= 5012.009603
= $5012.01
and total interest = $12.01

 

[shayla]

thankyou.
I keep forgetting to divide the percentage so then i get the wrong answer. thankyou again.

Hannah