Compound Interest Practice
Question 2
Calculate the total amount of money accumulated
of a $5000 investment
with the compound interest rate of 10%. The
duration of the loan is 3 years.
Answer
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Step by Step Solution
Step 1
We start with the compound interest formula:
Where:
Where:
- A is the total amount of money (including interest) after n years
- P is the principal ($5000)
- r is the interest rate per year (10 ÷ 100 = 0.1)
- n is the loan duration in year (3 years).
Step 2
With P=5000, r=0.1 and n=3, we can substitute these values into the formula as shown:
Step 3
The total amount accumulated is $6655. Hence, the answer is A.
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