Jameson Insurance invests $100,000 for five years in a guaranteed investment certificate that pays 4% interest compounded quarterly. How much interest will Jameson earn over that period?

Question

Quizplus · Accepted Answer

To calculate the interest earned, we can use the formula:
A=P(1+r/n)^(n*t)
where
A = final amount
P = principal (initial amount invested)
r = annual interest rate (as a decimal)
n = number of times compounded per year
t = time in years

Plugging in the given values, we get:
A = 100,000(1+0.04/4)^(4*5)
A = 122,020.49

So the interest earned is:
Interest = A - P
Interest = 122,020.49 - 100,000
Interest = 22,020.49

Therefore, the answer is D.

Jameson Insurance Invests $100,000 for Five Years in a Guaranteed