A cooperative society invested \text{₦}80,000 in a fixed deposit fund that pays compound i… — JAMB UTME

A cooperative society invested $\text{₦}80,000$ in a fixed deposit fund that pays compound interest at a rate of $10\%$ per annum compounded annually. What is the total compound interest earned by the cooperative society at the end of $2$ years?

A
$\text{₦}16,000$
$\text{₦}16,800$ Answer
C
$\text{₦}96,000$
D
$\text{₦}96,800$

Answer

\text{₦}16,800

Using the compound interest formula for total amount,

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

, with principal

P = \text{₦}80,000

, rate

r = 10\%

, and time

n = 2

years:

A = 80000 \times (1.1)^2 = \text{₦}96,800

. The interest earned is the difference between the total amount and the principal:

I = 96800 - 80000 = \text{₦}16,800

Step-by-Step Solution

Calculate the total accumulated amount

A

using the compound interest formula

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

A = 80000 \times \left(1 + \frac{10}{100}\right)^2 = 80000 \times (1.1)^2 = 80000 \times 1.21 = \text{₦}96,800

The formula yields the full final balance after compound growth over 2 years.

Subtract the initial principal

P

from the total amount

A

to find the compound interest earned

I

I = A - P = 96800 - 80000 = \text{₦}16,800

Interest earned represents only the financial growth beyond the starting capital.

Key Concept

Compound Interest and Total Accumulated Amount

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