R2 000 is invested for 2 years at 10% compound interest per year. How much interest is earned?
Answer and explanation
Correct answer: B. R420
- Step 1: Final amount = 2 000 × (1 + 0,1)^2 = R2 420.
- Step 2: Interest = final amount − R2 000 = R420.
Answer
R420.
Why not the others: R400: simple interest was used instead of compound interest. R2 420: this is the final amount, not the interest. R200: interest for one year only.
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