The Compound Interest would be $1104.895
What is Compound Interest ?
The interest charged on a loan or deposit is known as compound interest. It is the idea that we use the most frequently on a daily basis. Compound interest is calculated for an amount based on both the principal and cumulative interest. The main distinction between compound and simple interest is this. If we examine our bank statements, we will typically see that our account is credited with interest on a yearly basis. Even though the principal remains the same, the interest changes annually. We can observe that interest rises over time. As a result, we can infer that the interest the bank charges is compound interest, or CI, rather than simple interest.
Number of quarters in 5years =5×4=20
Quarterly rate of compound interest
r=24=0.5%
Initial amount
P=$1000
hence the total amount after 5years
= P(1+r/100)n
=1000(1+0.5/100)^20
=1000(1.005)^20
=$1104.895
Hence, The Interest will be $1104.895
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