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What is the compound interest on a principal of $5000 at an annual interest rate

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Question: What is the compound interest on a principal of $5000 at an annual interest rate of 10% for 1 year?

Options:

  1. $500
  2. $550
  3. $600
  4. $650

Correct Answer: $550

Solution: 

Compound Interest = P(1 + r/n)^(nt) - P = 5000(1 + 0.10/1)^(1*1) - 5000 = 5000(1.10) - 5000 = 500.

What is the compound interest on a principal of $5000 at an annual interest rate

Practice Questions

Q1
What is the compound interest on a principal of $5000 at an annual interest rate of 10% for 1 year?
  1. $500
  2. $550
  3. $600
  4. $650

Questions & Step-by-Step Solutions

What is the compound interest on a principal of $5000 at an annual interest rate of 10% for 1 year?
  • Compound Interest – The interest calculated on the initial principal, which also includes all the accumulated interest from previous periods.
  • Principal Amount – The initial sum of money invested or loaned, in this case, $5000.
  • Interest Rate – The percentage at which interest is calculated on the principal, here it is 10% annually.
  • Time Period – The duration for which the money is invested or borrowed, in this case, 1 year.
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