Question 488896: what is the interest if the Principal is $720, the Rate is 5 1/4% and the Time is 3 years?
Found 2 solutions by Theo, ikleyn:
Answer by Theo(13342)   (Show Source):
You can put this solution on YOUR website! if the interest is compounded monthly (normal bank practice), then $720.00 would be equal to $847.2093772in 3 years.
if the interest is compounded annually, then $720.00 would be equal to $844.1213401 in 3 years.
if the interest was compounded daily, then $720.00 would be equal to $847.4908701 in 3 years.
if the interest was compounded continuously, then $720.00 would be equal to $847.50
continuous compounding is given by the formula:
F = P * e^(i*y)
annual, monthly, daily compounding is given by the formula:
F = P * (1+(i/c)^(y*c)
P is the present amount
F is the future amount
i is the annual interest rate
y is the number of year
c is the compounding period.
e is the scientific constant of 2.718281828
example:
for monthly compounding, the variables become:
P = $725.00
F = F
i = .0525
y = 3
c = 12
the formula of F = P * (1+(i/c))^(y*c) becomes:
F = $724.00 * (1 + (.0525/12))^(*3*12) which becomes:
F = $724.00 * (1.004375)^36 which becomes:
F = $847.2093772
Answer by ikleyn(52957)  (Show Source):
You can put this solution on YOUR website! .
what is the interest if the Principal is $720, the Rate is 5 1/4% and the Time is 3 years?
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Tutor @Theo treats this problem as discretely compound or continuously compound,
but NOTHING in this problem points to these ways compounding.
In my view, there is NO COMPOUNDING in this problem, at all,
and by default, we should treat this problem as simple interest.
For simple interest, the formula for the interest is
I = P*r*t,
where P is the principal, r is the rate as the decimal and 't' is time in years.
So, we substitute the input values into this formula, and we get for the interest
i = 720*0.0525*3 = 113.40 dollars.
ANSWER. The interest is $113.40.
Solved.
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