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What is the compound interest on $1200 at a rate of 7% per annum for 5 years?

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Question: What is the compound interest on $1200 at a rate of 7% per annum for 5 years?

Options:

  1. $420.00
  2. $450.00
  3. $430.00
  4. $440.00

Correct Answer: $420.00

Solution: 

Compound Interest = P(1 + r/n)^(nt) - P = 1200(1 + 0.07/1)^(1*5) - 1200 = 1200(1.402552) - 1200 = 420.00

What is the compound interest on $1200 at a rate of 7% per annum for 5 years?

Practice Questions

Q1
What is the compound interest on $1200 at a rate of 7% per annum for 5 years?
  1. $420.00
  2. $450.00
  3. $430.00
  4. $440.00

Questions & Step-by-Step Solutions

What is the compound interest on $1200 at a rate of 7% per annum for 5 years?
  • Compound Interest – The interest calculated on the initial principal, which also includes all the accumulated interest from previous periods.
  • Formula Application – Understanding and applying the compound interest formula: A = P(1 + r/n)^(nt).
  • Time Value of Money – Recognizing how money grows over time with interest.
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