If $1500 is invested at a compound interest rate of 12% per annum, what will be

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Question: If $1500 is invested at a compound interest rate of 12% per annum, what will be the total amount after 1 year?

Options:

Correct Answer: $1680

Solution:

Amount = P(1 + r) = 1500(1 + 0.12) = 1500(1.12) = $1680.

If $1500 is invested at a compound interest rate of 12% per annum, what will be the total amount after 1 year?

If $1500 is invested at a compound interest rate of 12% per annum, what will be the total amount after 1 year?

Step 1: Identify the principal amount (P), which is $1500.
Step 2: Identify the interest rate (r), which is 12%. Convert this percentage to a decimal by dividing by 100, so r = 0.12.
Step 3: Use the formula for compound interest to find the total amount after 1 year: Amount = P(1 + r).
Step 4: Substitute the values into the formula: Amount = 1500(1 + 0.12).
Step 5: Calculate (1 + 0.12) which equals 1.12.
Step 6: Multiply the principal amount by this result: Amount = 1500 * 1.12.
Step 7: Calculate the final amount: 1500 * 1.12 = $1680.

Compound Interest Calculation – Understanding how to calculate the total amount after applying compound interest over a specified period.