$6304 in an account at 20% compounded daily. Calculate the compound interest C after 10 year

Question

Round to nearest penny

 

I keep getting $58,000 that seems to high.

Answer 1

Hi Patric,

 

Here is how I did it.

 

Principal, p = 6304

Annual Percentage Rate, interest i = 20% = 0.2

Number of times compounded n = 365                //you get this from the word daily

Number of years y = 10

 

c = p(1+(i/n))^ny

 

c =6304(1+(0.2/365)exp(365*10)

 

And I got c = $46,555

 

Hope this helps

Answer 2

C = P(1 + r/n)^nt - P

 

Where:

• C = the interest earned
• P = the principle or initial investment = $6304
• r = annual interest rate expressed as a decimal = 20% = 0.2
• n = number of compoundings per year = daily = 365
• t = years = 10

 

C = ($6304)(1 + 0.2/365)^365*10 - ($6304)

 

C = ($6304)(1.000548)³⁶⁵⁰ - $6304

 

C = ($6304)(7.385) - $6304

 

C = $46,555.10 - $6304 = $40,251.10

 

The interest is high because 20% is a very large interest rate.  At that rate, your investment will double about every 3.5 years, so in 10 years your investment will have increased 739%.  If you can get that rate of return, go for it!