Cynthia has earned $1, 000 and wants to put it in a savings account that earns 5% simple interest. Assuming she makes no additional deposits or withdrawals, what will be the total value of Cynthias account after 48 months?

COMPOUND INTEREST

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

Cynthia has earned $1, 000 and wants to put it in a savings account that earns 5% simple interest. Assuming she makes no additional deposits or withdrawals, what will be the total value of Cynthia’s account after 48 months?

A	$2, 400
B	$1, 200
C	$200
D	$3, 400

Explanation:

Detailed explanation-1: -The simple interest formula I = P r t can be used to find the balance in an account that earns compound interest.

Detailed explanation-2: -Simple Interest Formula To calculate simple interest, multiply the principal amount by the interest rate and the time. The formula written out is “Simple Interest = Principal x Interest Rate x Time.” This equation is the simplest way of calculating interest.

Detailed explanation-3: -What’s compound interest compared with simple interest? Compound is interest on your interest, or reinvesting accumulated interest from previous periods. Simple interest is paid only on the principal or the deposited funds.

Detailed explanation-4: -To start, you’d multiply your principal by your annual interest rate, or $10, 000 × 0.05 = $500. Then, you’d multiply this value by the number of years on the loan, or $500 × 5 = $2, 500.

There is 1 question to complete.

ECONOMICS (CBSE/UGC NET)

ECONOMICS

COMPOUND INTEREST