Question
4. Calculate the compound interest when $600 is invested for 2 years at 7% interest.
Answers
GPT 3.5
To calculate the compound interest, we use the formula:
A = P(1+r/n)^(nt)
Where:
A = the future value of the investment/loan, including interest
P = the principal investment amount (the initial deposit or loan amount)
r = annual interest rate (as a decimal)
n = number of times that interest is compounded per time period
t = number of time periods the money is invested/borrowed for
In the given problem:
P = $600
r = 7% = 0.07 (as a decimal)
n = 1 (since interest is compounded annually)
t = 2 years
Plugging the values into the formula:
A = 600(1 + 0.07/1)^(1*2)
A = 600(1 + 0.07)^2
A = 600(1.07)^2
A ≈ $709.56
Therefore, the compound interest when $600 is invested for 2 years at 7% interest is approximately $109.56.
A = P(1+r/n)^(nt)
Where:
A = the future value of the investment/loan, including interest
P = the principal investment amount (the initial deposit or loan amount)
r = annual interest rate (as a decimal)
n = number of times that interest is compounded per time period
t = number of time periods the money is invested/borrowed for
In the given problem:
P = $600
r = 7% = 0.07 (as a decimal)
n = 1 (since interest is compounded annually)
t = 2 years
Plugging the values into the formula:
A = 600(1 + 0.07/1)^(1*2)
A = 600(1 + 0.07)^2
A = 600(1.07)^2
A ≈ $709.56
Therefore, the compound interest when $600 is invested for 2 years at 7% interest is approximately $109.56.