Question

Initial Knowledge Check

Answer 1

(a) The amount in the account at the end of 1 year is $3330

(b) The amount in the account at the end of 2 year is $3696.3

• Compound interest is interest calculated on the principal and the interest accrued in previous periods.
• General formula for the number of annual interest on the principal. If the interest is compounded annually, the amounts is given by $A=P(1+\frac{R}{100} )^t$ where "A" represents the new principal sum or the total amount of money after compounding period , "P" represents the original amount or initial amount , "r" is the annual interest rate , "t" represents the number of years .

It is given that Deon deposit $3000 that pays 11% interest compounded each year .

(a) Putting P = $3000, R =  11%  , T = 1 year in equation (1) , we get

           $A=3000(1+\frac{11}{100} )^1\\\\A=3000(1+0.11)\\A=3000(1.11)\\A=3330$

(b) Putting P = $3000, R =  11%  , T = 2 year in equation (1) , we get

       $A=3000(1+\frac{11}{100} )^2\\\\A=3000(1+0.11)^2\\A=3000(1.11)^2\\A=3000\times1.23\\A=3696.3$

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