To find out how much more the investment would earn in 3 years if it was compounded annually, we need to calculate the future value of the investment. The formula to calculate the future value of an investment with compound interest is:
A = P(1 + r/n)^(nt)
Where:
A = Future value
P = Initial principal (the amount deposited)
r = Interest rate (in decimal form)
n = Number of times interest is compounded per year
t = Number of years
In this case, Abdul deposited $2000 and the interest rate is 5.4% (0.054) per year. The interest is compounded annually, so n = 1. We want to calculate the future value after 3 years, so t = 3.
Now let's calculate the future value using the formula:
A = 2000(1 + 0.054/1)^(1*3)
A = 2000(1.054)^3
A = 2000 * 1.166419464
A ≈ $2332.84
The investment would earn approximately $2332.84 - $2000 = $332.84 more in 3 years if it was invested with 5.4% interest per year, compounded annually.