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5 February, 07:51

Amelia plans to open a compound interest savings account with a $22,000 deposit at a bank with an annual interest rate of 5.25%. How much more interest will she earn over 10 years if she chooses an account that compounds interest quarterly instead of annually?

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  1. 5 February, 08:07
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    Compound interest formula

    A = P (1+r/n) ^ (nt)

    annually:

    quarterly:

    A = 22,000 (1 + 0.0525/1) ^10 = 36,698.11

    quarterly:

    A = 22,000 (1 + 0.0525/4) ^ (4*10) = 37,063.29

    37,063.29 - 36,698.11 = 365.18

    answer: compound interest quarterly earned $365.18 more than annually
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