Question: What will be the compound interest on $8000 at an interest rate of 8% per annum for 3 years?

Options:

1. $2000.00
2. $2005.12
3. $2040.00
4. $2050.00

Correct Answer: $2005.12

Solution:

Compound Interest = P(1 + r/n)^(nt) - P = 8000(1 + 0.08/1)^(1*3) - 8000 = 8000(1.259712) - 8000 = 2005.12