Question

If you invest $2,000 today for three years at 5% interest paid annually, you will earn a total of $_____ in interest. assume you re-invest all interest.

Answer 1

P = $2,000, principal
r = 5% = 0.05, interest rate
n = 1, compounding interval
t = 3 years

The value after 3 years is
A = 2000*(1 + 0.05)³ = $2,315.25
Interest earned = 2315.25 - 2000 = $315.25

Answer: $315.25