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What is the compound interest on a principal of $1000 at an annual interest rate

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Question: What is the compound interest on a principal of $1000 at an annual interest rate of 5% for 3 years?

Options:

  1. $157.63
  2. $150.00
  3. $100.00
  4. $115.76

Correct Answer: $157.63

Solution: 

Compound Interest = P(1 + r/n)^(nt) - P = 1000(1 + 0.05/1)^(1*3) - 1000 = 1000(1.157625) - 1000 = $157.63

What is the compound interest on a principal of $1000 at an annual interest rate

Practice Questions

Q1
What is the compound interest on a principal of $1000 at an annual interest rate of 5% for 3 years?
  1. $157.63
  2. $150.00
  3. $100.00
  4. $115.76

Questions & Step-by-Step Solutions

What is the compound interest on a principal of $1000 at an annual interest rate of 5% for 3 years?
  • Compound Interest – The interest calculated on the initial principal, which also includes all the accumulated interest from previous periods.
  • Formula Application – Understanding and applying the compound interest formula: A = P(1 + r/n)^(nt).
  • Interest Rate and Time – Recognizing the impact of the interest rate and the time period on the total amount of interest accrued.
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