A sum of $1500 is invested at a compound interest rate of 7% per annum. What wil

₹0.0

Question: A sum of $1500 is invested at a compound interest rate of 7% per annum. What will be the amount after 1 year?

Options:

Correct Answer: $1605.00

Solution:

Amount = P(1 + r)^n = 1500(1 + 0.07)^1 = 1500(1.07) = $1605.00.

A sum of $1500 is invested at a compound interest rate of 7% per annum. What will be the amount after 1 year?

A sum of $1500 is invested at a compound interest rate of 7% per annum. What will be the amount after 1 year?

Step 1: Identify the principal amount (P), which is $1500.
Step 2: Identify the interest rate (r), which is 7%. Convert this to decimal form by dividing by 100, so r = 0.07.
Step 3: Identify the number of years (n), which is 1 year.
Step 4: Use the compound interest formula: Amount = P(1 + r)^n.
Step 5: Substitute the values into the formula: Amount = 1500(1 + 0.07)^1.
Step 6: Calculate (1 + 0.07) = 1.07.
Step 7: Now calculate Amount = 1500 * 1.07.
Step 8: Multiply 1500 by 1.07 to get Amount = $1605.00.

Compound Interest – Understanding how compound interest works, including the formula used to calculate the future value of an investment.
Interest Rate Application – Applying the interest rate correctly in the formula to find the total amount after a specified time period.
Time Period – Recognizing the time period for which the interest is calculated, which in this case is 1 year.