Question

Adam invests 16,000 in an investment certificate (GIC) that pays 3 percent, compounded annually.

How much interest will he have earned after two years?

$867.40

$960.00

$974.40

$1,031.40

Answer 1

`~~~~~~ \textit{Compound Interest Earned Amount} \\\\ A=P\left(1+(r)/(n)\right)^(nt) \quad \begin{cases} A=\textit{accumulated amount}\\ P=\textit{original amount deposited}\dotfill &\$16000\\ r=rate\to 3\%\to (3)/(100)\dotfill &0.03\\ n= \begin{array}{llll} \textit{times it compounds per year}\\ \textit{annually, thus once} \end{array}\dotfill &1\\ t=years\dotfill &2 \end{cases}`

`A=16000\left(1+(0.03)/(1)\right)^(1\cdot 2) \implies A = 16974.4~\hfill \underset{earned~interest}{\stackrel{16974.4~~ - ~~16000}{ 974.40}}`