Calculate the compound interest when $600 is invested for 2 years at 7% interest
To calculate the compound interest on an investment, you can 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 (initial deposit or loan amount)
r = the annual interest rate (decimal)
n = the number of times that interest is compounded per year
t = the number of years the money is invested/borrowed for
In this case:
P = $600
r = 0.07
n = 1 (compounded annually)
t = 2 years
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 earned, subtract the initial investment amount from the future value:
Compound Interest = $686.94 - $600
Compound Interest = $86.94
Therefore, the compound interest earned would be $86.94.