A sum of money is invested at a rate of 10% per annum compound interest. How muc

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Question: A sum of money is invested at a rate of 10% per annum compound interest. How much will it amount to in 2 years if the principal is $1000?

Options:

$1100
$1200
$1210
$1300

Correct Answer: $1210

Solution:

Amount = P(1 + r)^n = 1000(1 + 0.10)^2 = 1000(1.21) = $1210.

A sum of money is invested at a rate of 10% per annum compound interest. How muc

Practice Questions

A sum of money is invested at a rate of 10% per annum compound interest. How much will it amount to in 2 years if the principal is $1000?

$1100
$1200
$1210
$1300

Questions & Step-by-Step Solutions

A sum of money is invested at a rate of 10% per annum compound interest. How much will it amount to in 2 years if the principal is $1000?

Step 1: Identify the principal amount (P), which is $1000.
Step 2: Identify the interest rate (r), which is 10% or 0.10 in decimal form.
Step 3: Identify the number of years (n), which is 2 years.
Step 4: Use the compound interest formula: Amount = P(1 + r)^n.
Step 5: Substitute the values into the formula: Amount = 1000(1 + 0.10)^2.
Step 6: Calculate (1 + 0.10) = 1.10.
Step 7: Raise 1.10 to the power of 2: (1.10)^2 = 1.21.
Step 8: Multiply the principal by the result: Amount = 1000 * 1.21.
Step 9: Calculate the final amount: Amount = $1210.

Compound Interest – Understanding how compound interest works, including the formula for calculating the future value of an investment.

A sum of money is invested at a rate of 10% per annum compound interest. How muc

What’s inside this PDF?

A sum of money is invested at a rate of 10% per annum compound interest. How muc

Practice Questions

Questions & Step-by-Step Solutions

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