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Compound interest

Calculate compound interest using A = P(1 + r)^n, find the interest earned, and solve problems involving an unknown principal or number of periods.

Worked examples

Calculate the final amount

Straightforward

Problem

$2000\$2000 is invested at 6%6\% per year compound interest for 3 years. Calculate the final amount.

Find the interest earned and compare with simple interest

Moderate

Problem

$1000\$1000 is invested at 8%8\% per year for 2 years. Calculate the compound interest earned and find how much more it is than the simple interest on the same investment.

Find the initial principal

Challenging

Problem

An investment grows to $2249.73\$2249.73 after 3 years at 4%4\% per year compound interest. Find the initial principal.

Practise

Q1·Straightforward
Calculate the amount after 2 years when $1000\$1000 is invested at 5%5\% per year compound interest. Use A=P(1+r)nA = P(1 + r)^n.
Q2·Straightforward
Calculate the amount after 3 years when $2000\$2000 is invested at 4%4\% per year compound interest.
Q3·Straightforward
Calculate the amount after 2 years when $500\$500 is invested at 10%10\% per year compound interest.
Q4·Straightforward
Calculate the amount after 1 year when $3000\$3000 is invested at 6%6\% per year compound interest.
Q5·Moderate
$1000\$1000 is invested at 5%5\% per year compound interest for 3 years. Calculate the compound interest earned.
Q6·Moderate
$2000\$2000 is invested at 8%8\% per year compound interest for 2 years. Calculate the compound interest earned.
Q7·Moderate
$1000\$1000 is invested at 6%6\% per year for 2 years. Simple interest earns $120\$120. How much more interest does compound interest earn than simple interest? Give your answer in dollars to 2 decimal places.
Q8·Moderate
$5000\$5000 is invested at 3%3\% per year compound interest for 4 years. Calculate the compound interest earned.
Q9·Challenging
An investment grows to $2315.25\$2315.25 after 3 years at 5%5\% per year compound interest. Find the initial principal PP.
Q10·Challenging
$1000\$1000 is invested at 10%10\% per year compound interest and grows to $1331\$1331. For how many years was it invested?
Q11·Challenging
A savings account earns 8%8\% per year compound interest. After 2 years the balance is $2332.80\$2332.80. What was the initial deposit?
Q12·Challenging
A term deposit of $4000\$4000 earns 5%5\% per year compound interest. After how many complete years will the balance first exceed $4800\$4800?