Answer
(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
