What will be the compound interest on $8000 at an interest rate of 5% per annum

What will be the compound interest on $8000 at an interest rate of 5% per annum for 2 years?

What will be the compound interest on $8000 at an interest rate of 5% per annum for 2 years?

Step 1: Identify the principal amount (P), which is $8000.
Step 2: Identify the annual interest rate (r), which is 5% or 0.05 in decimal form.
Step 3: Identify the number of times interest is compounded per year (n). Here, it is compounded annually, so n = 1.
Step 4: Identify the number of years (t) for which the money is invested, which is 2 years.
Step 5: Use the compound interest formula: A = P(1 + r/n)^(nt), where A is the total amount after interest.
Step 6: Substitute the values into the formula: A = 8000(1 + 0.05/1)^(1*2).
Step 7: Calculate the expression inside the parentheses: 1 + 0.05 = 1.05.
Step 8: Raise 1.05 to the power of (1*2) = 2: (1.05)^2 = 1.1025.
Step 9: Multiply this result by the principal: A = 8000 * 1.1025 = 8810.
Step 10: To find the compound interest, subtract the principal from the total amount: Compound Interest = A - P = 8810 - 8000 = 816.

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