Thread: compound interest

Calculate the amount for each section using compound interest.
A) $1000 invested at 3%/a compounded semiannually for 8 years
B) $5500 invested at 6%/a compounded monthly for 42 months
C) $1000 borrowed at 5%/a compounded quarterly for 5.5 years

Originally Posted by euclid2

Calculate the amount for each section using compound interest.
A) $1000 invested at 3%/a compounded semiannually for 8 years
B) $5500 invested at 6%/a compounded monthly for 42 months
C) $1000 borrowed at 5%/a compounded quarterly for 5.5 years

Study this. Then apply it to your set of problems.


Compound Interest Formula

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.