Wanjiru invests KSh 25000 at 4% per annum compound interest. How much is it worth after 2 years?
Answer and explanation
Correct answer: A. KSh 27040
- Step 1: Use A = P(1 + r/100)^n = 25000 x (1.04)^2. Step 2. A = KSh 27040. Answer: KSh 27040. Why not the others: KSh 27000: That uses simple interest, which does not add earlier interest to the amount. KSh 2000: That is only the total simple interest, not the amount. KSh 2040: That is the compound interest earned, without the original sum.
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