If 10000 is invested at x% annual interest for n years, which of the following represents the amount of interest that will earned in n years compounded annually?
Question
If 10000 is invested at x% annual interest for n years, which of the following represents the amount of interest that will earned in n years compounded annually?
Solution
The formula for compound interest is A = P(1 + r/n)^(nt), where:
- A is the amount of money accumulated after n years, including interest.
- P is the principal amount (the initial amount of money).
- r is the annual interest rate (in decimal).
- n is the number of times that interest is compounded per year.
- t is the time the money is invested for in years.
In this case, the interest is compounded annually, so n = 1. The principal amount P is $10,000. The annual interest rate r is x% or x/100 in decimal form. The time t is n years.
So, the amount of money accumulated after n years, including interest, is A = 10000(1 + x/100)^(n).
The amount of interest earned in n years is the accumulated amount A minus the principal amount P. So, the interest earned is A - P = 10000(1 + x/100)^(n) - 10000.
Therefore, the amount of interest that will be earned in n years compounded annually is 10000(1 + x/100)^(n) - 10000.
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