Question

Find the total interest earned for the following compound interest investments $3350 after 3 years at 7:25% p.a. with interest calculated annually

Answer 1

Solution!!

The concept of compound interest has to be used here. The principal, rate of interest and time is given in the question. We can do this with and without using the formula. It will be much easier if we do this with the formula. So, we will calculate amount and then the compound interest.

Principal = $3350

Time = 3 years

Rate of interest = 7.25%

Amount = P(1 + R/100)ⁿ

Amount = 3350(1 + 7.25/100)³

Amount = 3350(1 + 29/400)³

Amount = 3350(429/400)³

Amount = 3350 × (429/400) × (429/400) × (429/400)

Amount ≈ $4132.72

CI = Amount - Principal

CI ≈ $4132.72 - $3350

CI ≈ $782.72

Abbreviations used:-

Principal → P

Rate of interest → R

Time → n

Compound interest → CI