ECONOMICS
COMPOUND INTEREST
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Cam deposits $6500 in the bank. The interest rate is 5% compounded annually. He keeps the money in the account for 4 years. How much interest does he earn?
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7900.79
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1400.79
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8300.56
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1300
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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: -Summary: An investment of $10000 today invested at 6% for five years at simple interest will be $13, 000.
Detailed explanation-3: -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-4: -I=10020000×2×5=Rs. 2, 000. Was this answer helpful?
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