Compound Interest

Calculate the compound interest on a principal amount of $5000 at an annual interest rate of 5% for 3 years.

• $600.25

• $525.50

• $577.63

• $550.75

Solve the following word problem: If you invest $2000 at an interest rate of 8% compounded annually, how much money will you have after 5 years?

• $2938.66

• $3100.00

• $2800.00

• $2500.00

Explain the concept of exponential growth in the context of compound interest.

• Exponential growth in compound interest implies that the money remains stagnant without any growth

• Exponential growth in compound interest refers to the linear increase of money over time

• Exponential growth in compound interest means that the money decreases at a constant rate due to interest

• Exponential growth in compound interest means that the money grows at an increasing rate over time due to earning interest on both the initial principal and the accumulated interest.

Whcih of the following is an accurate comparison between compound interest with simple interest.

• Simple interest is always higher than compound interest

• Compound interest grows faster than simple interest due to interest being calculated on interest.

• Simple interest grows faster than compound interest

• Compound interest is calculated based on the initial principal only

Apply the compound interest formula to find the total amount accumulated on a principal of $3000 at an interest rate of 6% compounded quarterly for 2 years.

• The total amount accumulated is $3,500.00.

• The total amount accumulated is $3,200.00.

• The total amount accumulated is $3,648.36.

• The total amount accumulated is $3,800.00.

Calculate the compound interest on $4000 at an annual interest rate of 4% for 4 years.

• $679.43

• $1000.50

• $800.12

• $500.25

A principal amount of $6000 is invested at an interest rate of 10% compounded semi-annually. How much money will be accumulated after 3 years?

• $7500.50

• $7984.92

• $7000.00

• $8200.36

Which among the following situation bets describes a scenario where compound interest would be more beneficial than simple interest.

• Compound interest is not affected by the time period of the investment

• When investing for a long period of time or in financial products like savings accounts or retirement funds, compound interest can generate significantly higher returns compared to simple interest.

• Simple interest always outperforms compound interest

• Compound interest is only beneficial for short-term investments

If $1000 is invested at an interest rate of 12% compounded monthly, what will be the total amount after 2 years?

• $1200.00

• $1400.00

• $1349.86

• $1300.00

Which of the following best explains how the frequency of compounding affects the total amount in compound interest calculations.

• The more frequent the compounding, the higher the total amount in compound interest calculations.

• The less frequent the compounding, the higher the total amount in compound interest calculations.

• The total amount in compound interest calculations is inversely proportional to the frequency of compounding.

• The frequency of compounding has no impact on the total amount in compound interest calculations.