Question

Henry invested $1500 into an account that pays 2% interest compounded annually.

Answer 1

Answer: its 1591.81

Step-by-step explanation:

I took the test and tried with the answer on top and got it wrong.

Answer 2

The compound interest is obtained as $91.81, rounded off to the nearest hundredth.

How is compound interest estimated annually?

In order to compute compound interest, multiply the principle of the original loan by the annual interest rate multiplied by the number of compound periods minus one. You will then be left with the principal amount of the loan plus compound interest. The entire compound interest is then obtained by deducting the initial principal.

The equation that results will look like this:

Compound Interest = $P(\left(1+r\right)^{ t}-1)$

Amount, rate of interest and time is given as $1500, 2% and 3 years respectively.

First, change r as a percent to r as a decimal.

r = R/100

r = 2/100

r = 0.02 rate per year,

Then solve the equation for compound interest.

$\text{Compound Interest}=1500(\left(1+0.02\right)^{3}-1)\\=1500(1.061208-1)\\=15000\cdot 0.061208\\\\=91.81$

So, the compound interest is obtained as $91.81, rounded off to the nearest hundredth.

To know more about Compound interest:

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