Final answer:
The student's question involves calculating the total amount and compound interest on an initial investment of $25,000 for 3 years at a 15% annual interest rate. The future value is computed using the compound interest formula, and the compound interest is obtained by subtracting the principal from the future value.
Step-by-step explanation:
The question asks to find the amount and compound interest on $25,000 for 3 years at a rate of 15% per annum. To calculate compound interest, we use the formula:
A = P (1 + r/n)^(nt)
Where:
- A is the future value of the investment/loan, including interest
- P is the principal investment amount ($25,000)
- r is the annual interest rate (decimal)
- n is the number of times that interest is compounded per year
- t is the number of years the money is invested or borrowed for
In this case, the interest is compounded once a year (n=1), so the formula simplifies to:
A = 25000(1 + 0.15/1)^(1*3)
Use this formula to calculate the total future amount and then subtract the principal ($25,000) to get the compound interest.