SOLUTION: If $1,000 is deposited for 6 years in a savings account earning 3.6% interest compounded monthly, how much interest is earned during the sixth year?
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Question 1139582: If $1,000 is deposited for 6 years in a savings account earning 3.6% interest compounded monthly, how much interest is earned during the sixth year? Answer by Theo(13342) (Show Source):
f is the future value
p is the present value
r is the interest rate per time period
n is the number of time periods
the investment period is 6 years * 12 = 72 months.
the interest rate per month is 3.6% / 100 = .036 per year / 12 = .003 per month.
the formula becomes f = 1000 * (1 + .003) ^ 72 = 1240.701129.
that would be at the end of the sixth year.
at the end of the fifth year, the fomula becomes f = 1000 * (1 + .003) ^ 60.
solve for f to get f = 1196.894803.
subtract 1196.894803 from 1240.701129 and you get 43.80632619.
that's the interest earned during the sixth year.
this can be seen more clearly in the following spreadsheet printout.
the column headings are:
eom - end of month
rembal - remaining balance
int - interest earned from remaining balance in the previous month.
cumint - cumulative sum of interest earned up to the end of month indicated.
