What is the compound interest on 1000 at 10 for 3 years?

Calculating Compound Interest: A Step-by-Step Guide

Compound interest is a method of calculating interest where the interest earned in each period is added to the principal, resulting in a higher total return than simple interest. This is because the interest earned in each period is reinvested, earning interest on both the principal and the accumulated interest.

The formula for calculating compound interest is:

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

where:

• A is the future value of the investment/loan, including interest
• P is the principal investment/loan amount
• r is the annual interest rate in decimal form
• n is the number of times that interest is compounded per year
• t is the number of years the money is invested or borrowed for

To calculate the compound interest on $1000 at 10% for 3 years, we can use the following steps:

1. Convert the annual interest rate to decimal form: 10% = 0.10
2. Determine the number of times that interest is compounded per year: This information is not provided in the given context, so we will assume that interest is compounded annually (n = 1).
3. Substitute the values into the formula:

A = 1000(1 + 0.10/1)^(1 * 3)

A = 1000(1.10)^3

A = 1000(1.331)

A = $1331

Therefore, the compound interest on $1000 at 10% for 3 years is $331.