ECONOMICS
COMPOUND INTEREST
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Salvador inherited $20, 000 and he plans to invest it into a savings account that earns 6% interest compounded annually. Assuming he makes no additional deposits or withdrawals, what will be the total value of Salvador’s account after 10 years?
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$55, 816.95
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$15, 816.95
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$35, 816.95
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$32, 000
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Explanation:
Detailed explanation-1: -CI = A – P Here, 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.
Detailed explanation-2: -∴ Amount will be Rs. 3025 and Interest will be Rs. 525 If Compounded Annually.
Detailed explanation-3: -488.86. Hence, Compound interest would be Rs. 488.86.
Detailed explanation-4: -Given: P = Rs. 15000, R = 20%, T = 1.5 year. Concept used: When Calculating semi annually, rate gets halved and time gets doubled. Calculation: C.I. semi annually ⇒ R = 10%, T = 3 years. C.I. = P [(1 + R/100)T-1] C.I. = 15000[(1 + 10/100)3-1] = 15000 × (1331 – 1000) × 1000. = 15 × 331. ⇒ C.I. = Rs. 4965.
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