ECONOMICS
COMPOUND INTEREST
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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$57.00
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$57.88
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$57.89
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$60.00
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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: -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-3: -The compound interest will be Rs 783.
Detailed explanation-4: -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.