Question

you have $480 in an account which pays 4.5 % anually. how many additional dollars of interest would you earn over 4 years if you moved the money to an account earning 6.5%? round to the nearest cent

Answer 1

future value = amount invested *(1+r)^n.

here,

amount invested =480

r=4.5% or 6.5%.

n = 4 years.

when interest is 4.5%

=> 480*(1.045)^4

=>572.41.

when interest is 6.5%

=>480*(1.065)^4

=>617.50.

additional dollars of interest:

=>617.50-572.41

=>$45.09.