Mariah invested $10,000 in a bank certificate of deposit at a rate of 5% interest compounded annually for three years.

The total amount of interest compounded over the three years is $1,500.

Question

Mariah invested $10,000 in a bank certificate of deposit at a rate of 5% interest compounded annually for three years.
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​The total amount of interest compounded over the three years is $1,500.

Quizplus · Accepted Answer

The total amount of interest compounded over three years at a 5% annual rate on a $10,000 investment would be calculated using the formula for compound interest: A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest, P is the principal amount ($10,000), r is the annual interest rate (5% or 0.05), n is the number of times that interest is compounded per year (1, since it's compounded annually), and t is the time the money is invested for in years (3). Plugging in the values: A = $10,000(1 + 0.05/1)^(1*3) = $10,000(1.05)^3 = $11,576.25. The total amount of interest earned would be $11,576.25 - $10,000 = $1,576.25, not $1,500.

Mariah Invested $10,000 in a Bank Certificate of Deposit at a Rate