Compound Interest Calculation

00:00 5 marks

An investor places $1000 in a savings account with an annual interest rate of 5%, compounded annually, for 10 years. Answer the following:

Part a

3 minutes 2 marks

Question

Write down the compound interest formula.

Hint Hint

Hint

Remember that compound interest involves an exponent applied to the growth factor.

Answer Answer
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Complete Answer

The compound interest formula is $A = P(1 + r)^t$.

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Part b

5 minutes 3 marks

Question

Calculate the final amount for an investment of $1000 at an annual interest rate of 5%, compounded annually, for 10 years.

Hint Hint

Hint

Substitute the given values into $A = P(1 + r)^t$.

Answer Answer
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Complete Answer

$A \approx 1628.89$ dollars

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