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29 March, 04:44

When Lisa and Tom has their first child, they put $7,500 into a savings account that earns 6% compound interest. If Lisa and Tom did not add or remove anything from the savings account, how much interest will they have earned after 4 years?

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  1. 29 March, 06:01
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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 = $7500

    r = 6% = 6/100 = 0.06

    Assuming the interest was compounded annually, then

    n = 1 because it was compounded once in a year.

    t = 4 years

    Therefore,

    A = 7500 (1 + 0.06/1) ^1 * 4

    A = 7500 (1.06) ^4

    A = $9468.6

    The interest that they would have earned after 4 years is

    9468.6 - 7500 = $1968.6
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