Find the interest due on $1,090 at 8% for 5 years.

Solution:

The two types of interest which are calculated are a) Simple Interest and b) Compound Interest

a) Simple Interest (SI)

SI = Principal × Interest(in %) × Time (in years) / 100

= [1090 × 8 × 5] / 100

= 109 × 4

= $436

b) Compound Interest

To find the compound Interest we first compute the amount after 5 years

Amount = Principal(1 + r/100)ⁿ

= 1090(1 + 8/100)⁵

= 1090(1.08)⁵

= 1090(1.469)

= $1601.21

Compound Interest (CI) = 1601.21 - 1090 = $511.21

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Find the interest due on $1,090 at 8% for 5 years.

Summary:

The simple interest and compound interest on a principal of $1090 for 5 years at 8% for 5 years are $436 and $511.21 respectively.