Mon

08

Apr

2013

Compound Interest

So, the balance after 6 years is approximately $1,938.84.


 

 

P = principal amount (the initial amount you borrow or deposit)

r  = annual rate of interest (as a decimal)

t  = number of years the amount is deposited or borrowed for.

A = amount of money accumulated after n years, including interest.

n  =  number of times the interest is compounded per year 

 

 

Example:

An amount of $1,500.00 is deposited in a bank paying an annual interest rate of 4.3%, compounded quarterly.

 

What is the balance after 6 years?

 

Solution:

Using the compound interest formula, we have that


P = 1500, r = 4.3/100 = 0.043, n = 4, t = 6.


Therefore,

So, the balance after 6 years is approximately $1,938.84.



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