If $2000 is invested at a compound interest rate of 6% per annum, what will be t

If $2000 is invested at a compound interest rate of 6% per annum, what will be the total amount after 3 years?

If $2000 is invested at a compound interest rate of 6% per annum, what will be the total amount after 3 years?

Correct Answer: $2380.03

Step 1: Identify the principal amount (P). In this case, P = $2000.
Step 2: Identify the annual interest rate (r). Here, r = 6%, which is 0.06 in decimal form.
Step 3: Identify the number of years (n) the money is invested. In this case, n = 3 years.
Step 4: Use the compound interest formula: Amount = P(1 + r)^n.
Step 5: Substitute the values into the formula: Amount = 2000(1 + 0.06)^3.
Step 6: Calculate (1 + 0.06) = 1.06.
Step 7: Raise 1.06 to the power of 3: (1.06)^3 = 1.191016.
Step 8: Multiply the principal amount by the result: Amount = 2000 * 1.191016.
Step 9: Calculate the final amount: Amount = $2380.03.

Compound Interest – Understanding how compound interest works, including the formula used to calculate the total amount after a certain period.
Exponents – Applying exponentiation in the context of the compound interest formula.
Financial Literacy – Basic knowledge of investment growth over time due to interest.