How much is $2000 worth after 3 years at 6% interest compounded annually?
Answer and explanation
Correct answer: C. $2,382.03, from 2000(1.06)^3
- Step 1: Use A = P(1 + i)^n with P = 2000, i = 0.06, n = 3. Step 2. 1.06^3 = 1.191016, so A = 2000 x 1.191016 = 2382.03. Answer: $2,382.03. Why not the others: simple interest, 2 years and 1 year all use the wrong number of compounding periods.
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