Formula for compound interest:
http://upload.wikimedia.org/math/5/d/1/5d1a79e9cd23c806a46cfcff63d745bb.png
Where,
P = principal amount (initial investment) = $4000
r = annual nominal interest rate (as a decimal) = 7/100
k = number of times the interest is compounded per year = once a year (1)
t = number of years = 3
A = amount after calculation from above formula is $4900.17
I = Interest = $900.17Although compund interest question will always mention how they are compounded (quarterly or once a year etc.)