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12-03-2022 Compound Interest

Q. An amount of 5,000 is invested at a fixed rate of 8 per cent per annum. What amount will be the value of the investment in five years time, if the interest is compounded annually

A. 7346.64
B. 8346
C. 3456
D. 4567

Commented on 2022-03-12
Answer: Option A) 7346.64

Commented on 2022-03-12
Answer: Option A) 7346.64
The only part of this type of calculation that needs particularcare is that concerning the interest rate. The formula assumes thatr is a proportion, and so, in this case:r = 0.08In addition, we have P = 5,000 and n = 5, so:V = P(1 + r)5 = 5,000 x (1 + 0.08)5 = 5,000 x 1.469328 = 7,346.64Thus the value of the investment will be 7,346.64

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