Kwame invests $8000 in a savings account that pays compound interest at a rate of 5% per year. What is the value of his investment at the end of 2 years?

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Question

Kwame invests $8000 in a savings account that pays compound interest at a rate of 5% per year. What is the value of his investment at the end of 2 years?

Accepted Answer

$8820 — Award 1 mark for correct application of compound interest: A = P(1 + r/100)^n = 8000 × 1.05² = 8000 × 1.1025 = $8820. A is incorrect — this uses simple interest. C is incorrect — this calculates 5% of original only once. D is incorrect — this calculates for 3 years.

Answer

$9261

Answer

$8800

Answer

$8820

Answer

$8400

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