Suppose you lend $2,500 at 11.5% for 3 years.If the interest is compounded annually,how much interest will you receive in those 3 years?
A) $862.50
B) $965.49
C) $3,362.50
D) $2,465.49

Question

Quizplus · Accepted Answer

To calculate the interest, we can use the formula for compound interest:

A = P(1 + r/n)^(n*t)

Where:

A = the final amount including interest
P = the principle (initial amount)
r = the annual interest rate (as a decimal)
n = the number of times the interest is compounded per year
t = the time (in years)

Plugging in the given values, we get:

A = 2500(1 + 0.115/1)^(1*3)
A = 2500(1.115)^3
A = 2500(1.389)
A = 3472.50

So, the total interest earned is:

3472.50 - 2500 = 972.50

Rounding to the nearest cent, we get:

Answer: B) $965.49

Suppose You Lend $2,500 at 11