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Solution:
Compound interest can be determined as:
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 is the number of times the interest is compounded per unit of time
General formula is
CI = P(1 + r )t - P
P = $100.00, r = 10% = 0.1, t = 3 years [Given]
Compound Interest = 100(1 + 0.1)3 - 100
= 100(1.1)3 - 100
By further calculation
=100 × 1.331 - 100
= 133.1 - 100
= 33.1
Therefore, the compound interest is $ 33.1.
Summary:
The compound interest on a three-year, $100.00 loan at a 10 percent annual interest rate is $ 33.1.
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