Question

What is the compound interest if the principle is 2500, the rate is 8%, the time is 4 years, and it's compounded annually? Please add explanation

Answer 1

Answer:

901.22

Step-by-step explanation:

It is given that,

Principal = 2500

Rate of interest = 8% = 0.08 compounded annually.

No. of times interest compounded in a period = 1

Time is 4 years.

Formula for amount is

$A=P(1+\dfrac{r}{n})^{nt}$

where, P is principal, r is rate of interest, n is number of times interest compounded in period and t is number of years.

Substitute P=2500, r=0.08, n=1 and t=4 in the above formula.

$A=2500(1+\dfrac{0.08}{1})^{1(4)}$

$A=2500(1.08)^{4}$

$A\approx 3401.22$

So, the compound interest is

$C.I.=A-P$

$C.I.=3401.22-2500$

$C.I.=901.22$

Therefore, the compound interest is 901.22.