Question

Harry invests $800 for 2 years at a rate of 3% per year compound interest.

Calculate the amount of interest he receives at the end of the 2 years

Answer 1

$48.72

Explanation:

You want to know the amount of interest earned by an investment of $800 for 2 years when the interest rate is 3% compounded annually.

Interest

The balance in the account is given by ...

A = P(1 +r)^t

where P is the principal invested at rate r compounded annually for t years.

The interest is the difference between the account value and the initial investment:

I = P(1 +r)^t -P

I = P((1 +r)^t -1) = $800(1.03² -1) = $48.72

The amount of interest Harry receives is $48.72.

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