ECONOMICS (CBSE/UGC NET)

ECONOMICS

COMPOUND INTEREST

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

Chase Bank is offering each of it’s customers a record 3.4% interest on new savings account. If Mrs. Shaw opens an account with $1, 500, how much interest will she earn in 3 years?

A	$15, 300
B	$1, 530
C	$153
D	The answer is not shown

Explanation:

Detailed explanation-1: -Suppose you had $100 in a savings account and the interest rate was 2% per year. After 5 years, how much do you think you would have in the account if you left the money to grow? Answer: C, more than $102.

Detailed explanation-2: -Savings accounts earn compound interest, which means the interest you earn in one period gets deposited into your account, and then in the next period, you earn interest on that interest.

Detailed explanation-3: -In savings accounts, interest can be compounded, either daily, monthly, or quarterly, and you earn interest on the interest earned up to that point. The more frequently interest is added to your balance, the faster your savings will grow.

Detailed explanation-4: -A represents the new principal sum or the total amount of money after compounding period. P represents the original amount or initial amount. r is the annual interest rate. n represents the compounding frequency or the number of times interest is compounded in a year.

There is 1 question to complete.