Question: What will be the compound interest on $8000 at a rate of 5% per annum for 2 years?

Options:

1. $816.00
2. $800.00
3. $850.00
4. $900.00

Correct Answer: $816.00

Solution:

Compound Interest = P(1 + r/n)^(nt) - P = 8000(1 + 0.05/1)^(1*2) - 8000 = 8000(1.1025) - 8000 = 816.00