Precision Engineering invested $95,000 at 5.5 percent interest, compounded annually for 2 years.How much interest did the company earn over this period of time?
A)$95,000
B)$10,737.38
C)$10,450.00
D)$2,612.50
E)$10,931.36

Question

Quizplus · Accepted Answer

The correct answer is B. The interest earned over the 2-year period can be calculated using the formula A = P(1 + r/n)^(nt), where A is the final amount, P is the principal amount, r is the annual interest rate, n is the number of times per year that the interest is compounded, and t is the number of years. In this case, P = $95,000, r = 5.5%, n = 1 (since the interest is compounded annually), and t = 2. Plugging these values into the formula, we get A = $95,000(1 + 0.055/1)^(1*2) = $105,737.38. The interest earned is therefore $105,737.38 - $95,000 = $10,737.38.

Precision Engineering Invested $95,000 at 5