Final answer:
The simple interest on BD 2000 at a rate of 20% over 4 years is BD 1600. When compounded annually at the same rate and period, the interest amount is BD 2147.2.
Step-by-step explanation:
Interest Calculation
For part A, we need to solve the interest earned on BD 2000 at 20% for 4 years, not compounded (simple interest). The simple interest formula is:
Interest = Principal × Rate × Time
Therefore:
Interest = BD 2000 × 20% × 4
Interest = BD 2000 × 0.20 × 4 = BD 1600
For part B, we will calculate the interest compounded annually using the formula:
A = P(1 + r)ⁿ
Where A is the amount after interest, P is the principal, r is the annual interest rate in decimal form, and n is the number of years. Thus:
A = BD 2000(1 + 0.20)⁴
A = BD 2000(1.20)⁴
A = BD 2000 × 2.0736
A = BD 4147.2
The compounded annual interest amount is BD 4147.2 - BD 2000 = BD 2147.2