4. Calculate the compound interest when $600 is invested for 2 years at 7% interest.
To calculate the compound interest, we use the formula:
A = P(1+r/n)^(nt)
Where:
A = the future value of the investment/loan, including interest
P = the principal investment amount (the initial deposit or loan amount)
r = annual interest rate (as a decimal)
n = number of times that interest is compounded per time period
t = number of time periods the money is invested/borrowed for
In the given problem:
P = $600
r = 7% = 0.07 (as a decimal)
n = 1 (since interest is compounded annually)
t = 2 years
Plugging the values into the formula:
A = 600(1 + 0.07/1)^(1*2)
A = 600(1 + 0.07)^2
A = 600(1.07)^2
A ≈ $709.56
Therefore, the compound interest when $600 is invested for 2 years at 7% interest is approximately $109.56.
To calculate the compound interest, we can use the formula:
A = P(1 + r/n)^(nt)
Where:
A = the future value of the investment
P = the initial principal amount ($600 in this case)
r = the annual interest rate (7% in this case)
n = the number of times that interest is compounded per year (assuming it is compounded annually, n = 1)
t = the number of years the money is invested (2 in this case)
Plugging in the values, we can calculate the compound interest:
A = 600(1 + 0.07/1)^(1*2)
A = 600(1 + 0.07)^2
A = 600(1.07)^2
A = 600(1.1449)
A = $686.94
To calculate the compound interest, subtract the initial principal amount from the future value:
Compound Interest = A - P
Compound Interest = $686.94 - $600
Compound Interest = $86.94
Therefore, the compound interest when $600 is invested for 2 years at 7% interest is $86.94.