Understanding Compound Interest Basics

If you invest $1000 at an annual interest rate of 5% compounded annually, what will be the total amount after 3 years?

• $1150.00

• $1157.63

• $1100.00

• $1050.00

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What is the formula for calculating compound interest?

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If $5000 is invested at an annual interest rate of 4% compounded quarterly, what will be the total amount after 2 years?

• $5408.16

• $5200.00

• $5412.16

• $5300.00

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How many times is the interest compounded annually if it is compounded monthly?

• 6

• 12

• 4

• 2

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If the principal amount is $2000, the annual interest rate is 3%, and the interest is compounded semi-annually, what is the amount after 5 years?

• $2318.55

• $2320.00

• $2315.00

• $2300.00

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Which of the following statements is true about compound interest?

• Compound interest is calculated only on the initial principal.

• Compound interest is calculated on the initial principal and also on the accumulated interest of previous periods.

• Compound interest is always less than simple interest.

• Compound interest does not depend on the frequency of compounding.

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If $1500 is invested at an annual interest rate of 6% compounded annually, what will be the total amount after 4 years?

• $1897.46

• $1800.00

• $1900.00

• $1850.00

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What is the effect of increasing the frequency of compounding on the total amount of compound interest?

• It decreases the total amount.

• It has no effect on the total amount.

• It increases the total amount.

• It doubles the total amount.

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If $2500 is invested at an annual interest rate of 5% compounded monthly, what will be the total amount after 3 years?

• $2900.00

• $2909.57

• $2950.00

• $2850.00

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Which of the following is NOT a factor in determining the amount of compound interest?

• Principal amount

• Interest rate

• Time period

• Currency type

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