ECONOMICS
COMPOUND INTEREST
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
Cam borrows $6500 off the bank. The interest rate is 5% compounded annually. It takes him 4 years to repay the money. How much INTEREST does he end up paying?
|
|
7900.79
|
|
|
1400.79
|
|
|
8300.56
|
|
|
1300
|
Explanation:
Detailed explanation-1: -Compound interest is the interest you earn on interest. This can be illustrated by using basic math: if you have $100 and it earns 5% interest each year, you’ll have $105 at the end of the first year. At the end of the second year, you’ll have $110.25.
Detailed explanation-2: -How does the rule of 72 work? Using the rule of 72, you would estimate that an investment with a 5% compound interest rate would double in 14 years (72/5).
Detailed explanation-3: -Hence, the interest earned is Rs 734.5.
Detailed explanation-4: -I=10020000×2×5=Rs. 2, 000. Was this answer helpful?
There is 1 question to complete.