Rhianna opened a savings account and deposited 100.00 as principal. The account earns 12% interest, compounded monthly. How much interest will she earn after 2 years?Round your answer to the nearest cent.

Solution

R hianna o p e n e d a s a v in g s a cco u n t an d d e p os i t e d 100.00 a s p r in c i p a l . T h e a cco u n t e a r n s 12% in t eres t, co m p o u n d e d m o n t h l y . Ho w m u c h in t eres t w i ll s h e e a r n a f t er 2 ye a rs ? R o u n d yo u r an s w er t o t h e n e a res t ce n t .

Interest : 26.97

Solution steps

Translate the problem into an equation:

126.97346 \dots = 100 + I

Solve for

I, 126.97346 \dots = 100 + I : I = 26.97

Interest : 26.97