Question

Evie's interest after 3 years (compounded annually):

A) Interest = P(1 + R/n)^(nt) - P
B) Interest = $500(1 + 0.02/1)^(1*3) - $500
C) Interest = $500(1.02)^3 - $500
D) Interest ≈ $530.60 - $500 = $30.60

Answer 1

The formula for calculating compound interest is Interest = P(1 + R/n)^(nt) - P. Using this formula, Evie's interest after 3 years (compounded annually) would be $500(1.02)^3 - $500.

Step-by-step explanation:

The formula for calculating compound interest is:

Interest = P(1 + R/n)^(nt) - P

Where:

• P is the principal amount (initial investment)
• R is the annual interest rate (as a decimal)
• n is the number of times that interest is compounded per year
• t is the number of years

Using the given formula, the calculation for Evie's interest after 3 years (compounded annually) would be:

Interest = $500(1 + 0.02/1)^(1*3) - $500

Simplifying the calculation further:

Interest = $500(1.02)^3 - $500

Therefore, option C) Interest = $500(1.02)^3 - $500 is the correct answer.