# What is the compound interest on a three-year, $100.00 loan at a 10 percent annual interest rate?

Compound interest is the interest paid on both principal and interest, compounded in regular intervals.

## Answer: The compound interest on a three-year, $100.00 loan at a 10 percent annual interest rate is $ 33.1.

Let us apply the compound interest formula and thereby solve the given problem.

**Explanation:**

The formula for Compound interest is:

**Compound Interest = Amount - Principal**

**CI = P(1 + (r/n) ) ^{nt }- P**

Where, 'P' is the principal amount,

'r' is the rate of interest

't' is the time

'n' represents the number of times the interest is compounded per unit of time

The general format: **CI = P(1 + r ) ^{t }- P**

P = $100.00, r = 10% = 0.1, t = 3 years

Compound Interest = 100(1 + 0.1)^{3} - 100

= 100(1.1)^{3} - 100

=100 × 1.331 - 100

= 133.1 - 100

= 33.1