If we have had worked with simple interest instead of compound interest then this formula would have been C_01ntimes r-ntimes N. This formula applies when interest is earned on an annual basis and the interest is earned once a year. I would choose option 1.
This happens because the interest compounds but the amount taken off is constant.
Yes problems based on compound interest are increasingly popular. A simpler version of the compound interest formula is B P 1 r n where B is the final balance P is the principal r is the interest rate for 1 or each interest period and n is the number of payment periods. 5000 dollars is deposited in an account P 5000. A the future value of the investmentloan including interest P the principal investment amount the initial deposit or loan amount r the annual interest rate decimal n the number of times that interest is compounded per unit t t the time the money is invested or borrowed for.