(a) The amount available after 5 years is 87,786.23 dollars. (b) The amount of interest earned is 17,786.23 dollars.
Work Step by Step
Since 2 deposits were made you must first calculate the compound amount after 2 years. You will then add the 2nd deposit to this amount and compute the compound amount after 3 years. Using the 6% column of the compound interest table, the compound amount for 2 years is found to be 1.1236. Multiply this amount times the principle to calculate the amount at the end of 2 years.. $1.1236×30,000=33,708$ dollars Add the 2nd deposit to the amount already in the account. $33,708+40,000=73,708$ is the new principle. Using the 6% column of the compound interest table, the compound amount for 3 years is found to be 1.1910. Multiply this amount times the principle to calculate the amount at the end of the 5th year.. $1.1910×73,708=87,786.23$ dollars The interest is the difference between the ending amount and the amount deposited. The amount deposited is $30,000+40,000=70,000$ dollars.. $87,786.23-70,000=17,786.23$ dollars