What is the compound interest on $1200 for 3 years at a rate of 9% per annum?

What is the compound interest on $1200 for 3 years at a rate of 9% per annum?

Correct Answer: $354.03

Step 1: Identify the principal amount (P), which is $1200.
Step 2: Identify the interest rate (r), which is 9% per annum. Convert this to decimal form by dividing by 100: 9% = 0.09.
Step 3: Identify the number of years (n), which is 3 years.
Step 4: Use the formula for compound interest to find the total amount (A) after 3 years: A = P(1 + r)^n.
Step 5: Substitute the values into the formula: A = 1200(1 + 0.09)^3.
Step 6: Calculate (1 + 0.09) = 1.09.
Step 7: Raise 1.09 to the power of 3: (1.09)^3 = 1.295029.
Step 8: Multiply this result by the principal: A = 1200 * 1.295029 = $1554.03.
Step 9: Calculate the compound interest (CI) by subtracting the principal from the total amount: CI = A - P = 1554.03 - 1200.
Step 10: The compound interest is CI = $354.03.

No concepts available.