If a person invests $1000 at a compound interest rate of 8% per annum, what will

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Question: If a person invests $1000 at a compound interest rate of 8% per annum, what will be the amount after 1 year?

Options:

Correct Answer: $1080

Solution:

Amount = 1000 * (1 + 0.08)^1 = 1000 * 1.08 = $1080.

If a person invests $1000 at a compound interest rate of 8% per annum, what will be the amount after 1 year?

If a person invests $1000 at a compound interest rate of 8% per annum, what will be the amount after 1 year?

Step 1: Identify the initial investment amount, which is $1000.
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 1 year in this case.
Step 4: Use the compound interest formula: Amount = Principal * (1 + Rate)^Time.
Step 5: Substitute the values into the formula: Amount = 1000 * (1 + 0.08)^1.
Step 6: Calculate (1 + 0.08), which equals 1.08.
Step 7: Now calculate the amount: Amount = 1000 * 1.08.
Step 8: Multiply 1000 by 1.08 to get the final amount, which is $1080.

Compound Interest – Understanding how compound interest works and how to calculate the future value of an investment.