A principal of R4600 is invested for 24 months at a rate of 14% per annum compounded annually. Determine what the how much interest will be earned at the end of the term.

Question

14%


R1476.54


14.93%


R4600


R1378.16

Answer 1

To calculate the amount of interest earned, we can use the formula for compound interest:

A = P(1 + r/n)^(nt)

Where:
A = Total amount after n years
P = Principal amount (initial investment)
r = Interest rate per period
n = Number of periods
t = Time in years

Given:
P = R4600
r = 14% per annum
n = 1 (compounded annually)
t = 2 years

Plugging in the values:

A = 4600(1 + 0.14/1)^(1*2)
A = 4600(1.14)^2
A = 4600(1.2996)
A = R5973.76

Interest earned = Total amount - Principal
Interest earned = 5973.76 - 4600
Interest earned = R1373.76

Therefore, the amount of interest earned at the end of the term is R1373.76.