ECONOMICS (CBSE/UGC NET)

ECONOMICS

COMPOUND INTEREST

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

Jayden deposited $1, 800 in an account earning 10.5% compound interest. He makes no additional deposits or withdrawals. How much interest will Jayden’s account have earned at the end of 11 years?

A	$5, 398.31
B	$2, 019.17
C	$219.17
D	$3.598.31

Explanation:

Detailed explanation-1: -A 10% interest rate will double your investment in about 7 years (72 ∕ 10 = 7.2); an amount invested at a 12% interest rate will double in about 6 years (72 ∕ 12 = 6). Using the Rule of 72, you can easily determine how long it will take to double your money.

Detailed explanation-2: -Compound interest is calculated by multiplying the initial principal amount by one plus the annual interest rate raised to the number of compound periods minus one.

Detailed explanation-3: -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-4: -Summary: The future value of the investment of $10000 after 10 years at 10% will be $ 25940.

There is 1 question to complete.