Compound interest is the adding of interest to the principal sum of a loan or deposit. The rate of percentage per annum compound interest is 4%.
<h3>What is compound interest?</h3>
Interest on interest, or compound interest, is the adding of interest to the principal sum of a loan or deposit. It's the outcome of reinvesting interest rather than paying it out so that interest is received on the principal plus previously collected interest in the next quarter.
where A is the final amount
P is the principal amount
r is the rate of interest
n is the number of times interest is charged in a year
t is the number of years
Given the principal amount is 2,500, the time period for which the amount is compounded is 4%. Also, the final amount is 2704.
2,704 = 2,500(1+R)²
1.04 = 1 + R
R = 0.04 = 4%
Hence, the rate of percentage per annum compound interest is 4%.
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