Find the compound interest earned. Round to the nearest cent.
-$14,000 at 5% compounded annually for 3 years
A) $2100.00
B) $1435.00
C) $701.50
D) $2206.75

Question

Quizplus · Accepted Answer

The formula for compound interest is A=P(1+r/n)^(nt), where A is the ending amount, P is the principal (starting amount), r is the annual interest rate (as a decimal), n is the number of times the interest is compounded per year, and t is the number of years. Plugging in the given values, we get:

A = 14000(1+0.05/1)^(1*3)
A = 16369.75

To find the compound interest earned, we subtract the principal from the ending amount:

16369.75 - 14000 = 2369.75

Rounding to the nearest cent, we get $2206.75, which is choice D. Using the formula for compound interest, we get:
$14,000(1+0.05)^3 - $14,000 = $2,206.75
Therefore, the compound interest earned is $2,206.75, which is closest to choice D, $2206.75.

Find the Compound Interest Earned