If $2500 is invested at a compound interest rate of 8% per annum, what will be t

If $2500 is invested at a compound interest rate of 8% per annum, what will be the total amount after 3 years?

If $2500 is invested at a compound interest rate of 8% per annum, what will be the total amount after 3 years?

Step 1: Identify the principal amount (P), which is $2500.
Step 2: Identify the annual interest rate (r), which is 8% or 0.08 in decimal form.
Step 3: Identify the number of times interest is compounded per year (n), which is 1 for annual compounding.
Step 4: Identify the number of years (t) the money is invested, which is 3 years.
Step 5: Use the compound interest formula: Amount = P(1 + r/n)^(nt).
Step 6: Substitute the values into the formula: Amount = 2500(1 + 0.08/1)^(1*3).
Step 7: Calculate the expression inside the parentheses: 1 + 0.08 = 1.08.
Step 8: Raise 1.08 to the power of 3: (1.08)^3 = 1.259712.
Step 9: Multiply this result by the principal: Amount = 2500 * 1.259712.
Step 10: Calculate the final amount: Amount = 2975.00.

Compound Interest – The process of earning interest on both the initial principal and the accumulated interest from previous periods.
Formula Application – Using the compound interest formula A = P(1 + r/n)^(nt) to calculate the total amount after a certain period.
Understanding of Variables – Recognizing the meaning of P (principal), r (rate), n (number of times interest applied per time period), and t (time in years).