A principal amount of $3000 is invested for 3 years at 4% compounded semi-annually. Use the compound interest formula to determi
ne how much interest was earned on the investment.
1 answer:
The $378.49 was earned on the investment if the principal amount of $3000 is invested for 3 years at 4% compounded semi-annually.
<h3>What is compound interest?</h3>It is defined as the interest on the principal value or deposit and the interest which is gained on the principal value in the previous year.
We can calculate the compound interest using the below formula:
Where A = Final amount
P = Principal amount
r = annual rate of interest
n = how many times interest is compounded per year
t = How long the money is deposited or borrowed (in years)
Here,
P = $3000
r = 4% = 0.04
n = 2
t = 3 years
After plugging all the values in the formula:
After solving:
A = $3,378.49
I = A - P = 3,378.49 - 3000 = $378.49
Thus, the $378.49 was earned on the investment if the principal amount of $3000 is invested for 3 years at 4% compounded semi-annually.
Learn more about the compound interest here:
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