If a person invests $5000 at a compound interest rate of 8% per annum, what will

₹0.0

Question: If a person invests $5000 at a compound interest rate of 8% per annum, what will be the total amount after 3 years?

Options:

Correct Answer: $5934

Solution:

Amount = 5000 * (1 + 0.08)^3 = 5000 * 1.259712 = $6298.56.

If a person invests $5000 at a compound interest rate of 8% per annum, what will be the total amount after 3 years?

If a person invests $5000 at a compound interest rate of 8% per annum, what will be the total amount after 3 years?

Step 1: Identify the initial investment amount, which is $5000.
Step 2: Identify the annual compound interest rate, which is 8%. Convert this percentage to a decimal by dividing by 100, so 8% becomes 0.08.
Step 3: Determine the number of years the money is invested, which is 3 years.
Step 4: Use the compound interest formula: Amount = Principal * (1 + Rate)^Time.
Step 5: Substitute the values into the formula: Amount = 5000 * (1 + 0.08)^3.
Step 6: Calculate (1 + 0.08), which equals 1.08.
Step 7: Raise 1.08 to the power of 3: 1.08^3 = 1.259712.
Step 8: Multiply the result by the initial investment: 5000 * 1.259712 = 6298.56.
Step 9: The total amount after 3 years is $6298.56.

Compound Interest – Understanding how compound interest works, including the formula for calculating the total amount after a certain number of years.