If $8000 is invested at a compound interest rate of 3% per annum, what will be t

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Question: If $8000 is invested at a compound interest rate of 3% per annum, what will be the amount after 4 years?

Options:

Correct Answer: $9009.12

Solution:

Total Amount = 8000(1 + 0.03)^4 = 8000(1.12550881) = 9009.12

If $8000 is invested at a compound interest rate of 3% per annum, what will be the amount after 4 years?

If $8000 is invested at a compound interest rate of 3% per annum, what will be the amount after 4 years?

Step 1: Identify the principal amount (initial investment), which is $8000.
Step 2: Identify the annual interest rate, which is 3%. Convert this percentage to a decimal by dividing by 100: 3% = 0.03.
Step 3: Identify the number of years the money is invested, which is 4 years.
Step 4: Use the compound interest formula: Total Amount = Principal × (1 + Interest Rate)^(Number of Years).
Step 5: Substitute the values into the formula: Total Amount = 8000 × (1 + 0.03)^4.
Step 6: Calculate (1 + 0.03) = 1.03.
Step 7: Raise 1.03 to the power of 4: (1.03)^4 = 1.12550881.
Step 8: Multiply the principal amount by this result: Total Amount = 8000 × 1.12550881.
Step 9: Calculate the final amount: Total Amount = 9009.12.

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