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What is the compound interest on $2500 at a rate of 5% per annum for 4 years?

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Question: What is the compound interest on $2500 at a rate of 5% per annum for 4 years?

Options:

  1. $500.00
  2. $600.00
  3. $700.00
  4. $800.00

Correct Answer: $600.00

Solution: 

Compound Interest = 2500(1 + 0.05)^4 - 2500 = 2500(1.21550625) - 2500 = 603.77, rounded to $600.00

What is the compound interest on $2500 at a rate of 5% per annum for 4 years?

Practice Questions

Q1
What is the compound interest on $2500 at a rate of 5% per annum for 4 years?
  1. $500.00
  2. $600.00
  3. $700.00
  4. $800.00

Questions & Step-by-Step Solutions

What is the compound interest on $2500 at a rate of 5% per annum for 4 years?
  • Compound Interest – The interest calculated on the initial principal, which also includes all the accumulated interest from previous periods.
  • Exponential Growth – Understanding how the compound interest formula involves raising a base to a power, reflecting growth over multiple periods.
  • Financial Calculations – Applying the correct formula and understanding the implications of interest rates and time on investment growth.
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