Question

Glenn invested $18,000 at 5% interest compounded annually.

How much interest will Glenn earn in 3 years?

A.$20,837.25

B.$2340.23

C.$2837.25

D.$19,826.24

Answer 1

18000 dollars invested with 5% interest.
=> 18 000 dollars * 0.05 = 900 dollars for annual interest rate.
Now, how much interest will he be earning in 3 years?
=> first year = 18 900 dollars * .05 = 945 dollars for the 2nd year
=> 2nd year = 18 900 dollars + 945 = 19 845 dollars
19845 * .05 = 992.25
=> 3rd years = 19845 + 992.25 = 20837.25 total amount he will get back.
For interest = 900 + 945 + 992.25 = $2837.25