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You invest 1,560 for 20 years that compounds interest at 4.50% per annum. What proportion of the future value at the end of year 20 is made up of the interest on the interest? Please give your answer to two decimal places.

Solution

You invest 1, 560 for 20 years that compounds interest at 4.50% per annum. What proportion of the future value at the end of year 20 is made up of the interest on the interest? Please give your answer to two decimal places.

Solution

Amount : 3762.27

Solution steps

Translate the problem into an equation:

A = 1560 (1 + \frac{0.045}{1})^{1 \cdot 20}

1560 (1 + \frac{0.045}{1})^{1 \cdot 20} = 3762.27387 \dots

Round to the nearest hundredth:

3762.27

Amount : 3762.27

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