Final answer:
Jared will receive a total of $53,060.40 at the end of three years of compound interest on his $50,000 investment at a rate of 2% per year.
Step-by-step explanation:
To calculate the total amount that Jared receives at the end of three years with compound interest, we use the formula for compound interest:
Total amount = Principal × (1 + rate)number of periods
In Jared's case:
- Principal = $50,000
- Rate = 2% per year or 0.02 as a decimal
- Number of periods = 3 years
So, the calculation is:
Total amount = $50,000 × (1 + 0.02)3
After calculations, we get:
Total amount = $50,000 × 1.061208
Total amount = $53,060.40
Jared will receive a total of $53,060.40 at the end of three years. Compound interest can make a significant difference, as it involves interest calculation on the principal plus the accumulated interest, and the interest earned each period is added to the principal to calculate interest for the next period. This effect results in a larger total compound interest compared to simple interest over the same period with the same rate and principal.