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11 August, 21:56

Paul, who is self employed, placed $30,000 in an account that pays 6% annual interest, compounded quarterly. How much interest was earned in 10 years?

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  1. 11 August, 23:37
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    Step-by-step explanation:

    We would apply the formula for determining compound interest which is expressed as

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

    Where

    A = total amount in the account at the end of t years

    r represents the interest rate.

    n represents the periodic interval at which it was compounded.

    P represents the principal or initial amount deposited

    From the information given,

    P = 30000

    r = 6% = 6/100 = 0.06

    n = 4 because it was compounded 4 times in a year.

    t = 10 years

    Therefore,.

    A = 30000 (1 + 0.06/4) ^4 * 10

    A = 30000 (1 + 0.015) ^40

    A = 30000 (1.015) ^40

    A = $54421

    The amount of interest earned after 10 years is

    54421 - 30000 = $24421
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