Compound interest formula

Question

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

using this compound interest formula, find A when P = $1000

r= 6% t =5yrs n =4

Answer 1

A = P * { [1 + (r/n)] ^ (nt) }

 

So, you already have the formula down, that's good!

 

Just plug in the numbers!

A = $1000 * { [1 + (0.06/4)] ^ (4*5) }

 

A is what you are solving for - how much your original funds would accumulate into with compound interest.

• P = your original funds, how much money you start out with. In this case, $1000.
• r = the interest rate. In this case, 6% increase translates into 0.06, so just plug that in.
• n = how many times the interest is compounded per year. Annual = 1, Quarterly = 4, etc.
• t = period of time in years.

 

A = $1000 * { [1 + (0.06/4)] ^ (4*5) }

   = $1000 * { [1 + 0.015] ^ 20} 

   = $1000 * { 1.015 ^ 20 }

   = $1000 * 1.346855

   = $1346.855