Consider a $3,000 deposit earning 9 percent interest per year for four years. Wh

Question

Consider a $3,000 deposit earning 9 percent interest per year for four years. What is the future value? (Do not round intermediate calculations and round your final answer to 2 decimal places.) Future value $ 4234.74 How much total interest is earned on the original deposit? (Do not round intermediate calculations and round your final answer to 2 decimal places.) Total interest earned $ 1234.74

How much is interest earned on interest? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Interest earned on interest

Explanation / Answer

Future Value = PV* (1+r)n

FV = 3000*(1+0.09)4 =$4234.74

Total Interest earned = $4234.74 - $3,000 = $1234.74

Without Compounding interest will be = 3000*9% = $270 per annum

Total interest without compounding will be = $270*4 = $1080

Therefore the interest earned on interest will be = $1,234.74 - $1,080 = $154.74

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