Kelly deposits $1000 in a three year GIC with four percent interest compounded annually.How much interest would she earn by maturity?

Question

Quizplus · Accepted Answer

We can use the formula to calculate the compound interest:

A = P(1 + r/n)^(nt)

Where:

A = the amount at the end of the investment period
P = the principal investment amount
r = the annual interest rate (as a decimal)
n = the number of times the interest is compounded per year
t = the number of years

Plugging in the values given, we get:

A = 1000(1 + 0.04/1)^(1*3)
A = 1000(1.124864)
A = $1,124.86

The amount of interest earned is $1,124.86 - $1,000 = $124.86. Therefore, the best choice is A.

Kelly Deposits $1000 in a Three Year GIC with Four