Respuesta :
The value of principal amount of $20,000 after 5 years on 5% interest rate using formula of compound interest will be $25,526. So, the correct answer is (a).
Given information:
Principal amount = $20,000
Rate of interest (i) = 5% = 0.05
Amount using formula of compound interest,
Amount = Principal (1+i) ^5
Amount = 20,000(1+0.05) ^5 = $25,526
The interest earned on savings that is computed using both the original principal and the accrued interest over time is known as compound interest. The interest earned on savings that's also computed considering the both original principal and the interest accrued over time is known as compound interest. The yearly interest rate is increased to the amount of compounded periods minus one, and the starting principal is multiplied by these two factors. The obtained value is subsequently deducted from the loan's entire original amount.
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