ECONOMICS
COMPOUND INTEREST
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
Candice has $80 in a savings account that earns 5% interest, compounded annually.To the nearest cent, how much interest will she earn in 3 years?Use the formula B = p(1 + r)t, where B is the balance (final amount), p is the principal (starting amount), r is the interest rate expressed as a decimal, and t is the time in years.
|
|
$12.60
|
|
|
$12.61
|
|
|
$12.62
|
|
|
$12.00
|
Explanation:
Detailed explanation-1: -The formula for compound interest is A = P(1 + r/n)^nt where P is the principal balance, r is the interest rate, n is the number of times interest is compounded per year and t is the number of years.
Detailed explanation-2: -Solution: We use the present value formula, where A is $20, 000, r is 6% or 0.06, n is 12, and t is 5 years. Approximately $14, 827.45 should be invested today in order to accumulate to $20, 000 in five years.
Detailed explanation-3: -Thus, the required sum is Rs 1, 600.
Detailed explanation-4: -∴ The compound interest is Rs. 205.
There is 1 question to complete.