# Compound Interest?

• Nov 26th 2010, 03:01 AM
lilwayne
Compound Interest?
I don't really see what i'm doing wrong...can someone help me out?

thanks
• Nov 26th 2010, 03:34 AM
HallsofIvy
It's hard to say what you did wrong when you don't show what you did! I suspect that you used the formula, P(1+ r)^n, where n is the number of compounding periods and r is the interest per compounding period, incorrectly. It looks like you used n= 4, which is correct, compounding every have year for two years means compounding 4 times, but used r= .03 which is wrong. An interest rate of 3% means 3/2= 1.5% or .015 semi-annually.
• Nov 26th 2010, 08:08 AM
Wilmer
Or calculate the semi-annual rate the \$332 results at:

6000(1 + i)^4 = 6332
1 + i = (6332 / 6000)^(1/4)
i = .01355...

That's ~1.36% compared to 1.5% ; so A is better.
• Nov 26th 2010, 10:04 AM
lilwayne
i punched in .015 and 1.5 for the rate of interest per compounding period but both are wrong..maybe my other work is wrong? and yeah that's the formula i used.
• Nov 26th 2010, 11:39 AM
Wilmer
You're asking us to guess...wrong in what way? Did you change number of periods from 2 to 4?
• Nov 26th 2010, 04:23 PM
lilwayne
the way it goes is i have to punch in values to the blank spaces then press submit, if its wrong it says incorrect.
• Nov 26th 2010, 07:00 PM
Wilmer
sigh...
• Nov 26th 2010, 08:46 PM
lilwayne
...yeah i see i'm getting no where here, guess i'll just email my teacher and ask her for help.
• Nov 26th 2010, 10:16 PM
Wilmer
Good idea; let us know what you find out...
• Nov 27th 2010, 03:07 AM
lilwayne
• Nov 27th 2010, 07:36 AM
Wilmer
Quote:

Originally Posted by lilwayne
ah i see where i went wrong...

A=P(1+r/n)^nt

A = 6000(1.015)^4 = 6368.18

Yes. You were told that clearly by HallsofIvy.