If the interest had been compounded annually over a 6-year period, Beatrice would have made $1,876.13
What is interest?
- Interest is the cost associated with the right to borrow money, and it is frequently expressed as an annual percentage rate (APR).
- Interest is the payment a lender or financial institution makes in exchange for lending out money.
- The portion of a shareholder's shares that constitutes their ownership in a corporation; also known as interest.
- The two fundamental types of interest rates that can be applied to loans are simple and compound.
- Simple interest is the amount that the borrower must pay in order to obtain access to the funds, which is often a predetermined portion of the principal that was first lent to the borrower.
- Compound interest is the name for the interest that is charged on loans that have both principal and accruing interest. Less frequently occurs the second type of interest than the first.
- Next, let's figure out compound interest:
1400 (.05 × 6) + 1400 = 1,876.13
1,876.13
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