Question: What will be the compound interest on $8000 at a rate of 12% per annum for 1 year?

Options:

1. $960
2. $800
3. $720
4. $600

Correct Answer: $960

Solution:

Compound Interest = P(1 + r/n)^(nt) - P = 8000(1 + 0.12/1)^(1*1) - 8000 = 8000(1.12) - 8000 = $960