An artisan deposited \text{₦}20,000 into a savings account that pays a compound interest r… — JAMB UTME

An artisan deposited $\text{₦}20,000$ into a savings account that pays a compound interest rate of $10\%$ per annum compounded annually. What is the total compound interest earned at the end of $2$ years?

$\text{₦}4,200$ Answer
B
$\text{₦}24,200$
C
$\text{₦}4,000$
D
$\text{₦}2,000$

Answer

The total compound interest earned after 2 years is

\text{₦}4,200

The correct answer is obtained by calculating the total amount after 2 years at

10\%

compound interest, which is

20,000 \times (1.10)^2 = \text{₦}24,200

, and then subtracting the principal of

\text{₦}20,000

to get

\text{₦}4,200

Step-by-Step Solution

Calculate the total accumulated amount (

A

) after 2 years using the compound interest formula

A = P\left(1 + \frac{R}{100}\right)^n

A = 20,000 \left(1 + \frac{10}{100}\right)^2 = 20,000 \times (1.1)^2 = 20,000 \times 1.21 = \text{₦}24,200

Determines the total value of the investment at the end of the 2-year period.

Subtract the principal (

P

) from the total accumulated amount (

A

) to find the interest earned (

I = A - P

I = 24,200 - 20,000 = \text{₦}4,200

Isolates the interest earned from the initial principal amount.

Key Concept

Compound Interest Calculation

Estimated Time:45s

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