ECONOMICS
COMPOUND INTEREST
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The amount of interest earned.
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The amount of time that has passed.
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The total amount of money after a certain amount of time.
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The amount required to invest.
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Detailed explanation-1: -Compound interest, can be calculated using the formula FV = P*(1+R/N)^(N*T), where FV is the future value of the loan or investment, P is the initial principal amount, R is the annual interest rate, N represents the number of times interest is compounded per year, and T represents time in years.
Detailed explanation-2: -The compound interest is obtained by subtracting the principal amount from the compound amount. Hence, the formula to find just the compound interest is as follows: CI = P (1 + r/n)nt-P.
Detailed explanation-3: -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.