What is the compound interest on a three-year, $100.00 loan at a 10 percent annual interest rate?
$10.00
$21.00
$33.10
$46.41
What is the compound interest on a three-year, $100.00 loan at a 10 percent annual interest rate?
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What is the compound interest on a three-year, $100.00 loan at a 10 percent annual interest rate?
$10.00
$21.00
$33.10
$46.41
To calculate compound interest, we use the formula:
[ A = P (1 + r)^n ]
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 (decimal).
– ( n ) is the number of years the money is invested or borrowed.
For your question:
– ( P = 100 )
– ( r = 0.10 ) (10 percent as a decimal)
– ( n = 3 )
Plugging the values into the formula:
[ A = 100 (1 + 0.10)^3 ]
[ A = 100 (1.10)^3 ]
[ A = 100 times 1.331 ]
[ A approx 133.10 ]
Now, to find the compound interest, we subtract the principal from the total amount:
[ text{Compound Interest} = A – P = 133.10 – 100 = 33.10 ]
So, the compound interest on a three-year, $100.00 loan at a 10 percent annual interest rate is $33.10.