Need help on math

Question

The formula for compound interest is A=P(1+r/n)^nt, where P is the principle, r is the yearly interest rate, t is the number of years that the principle is invested, n is the number of compounding periods per year, and A is the amount which the principle will grow. Find the present value of $1000 which was invested 5 years ago at an annual interest rate of 8% compounded every 6 months.

Answer 1

Someone, 5 years ago, started with $1000. That's the "P". You are trying to determine the current value of it. That's the "A:". The compounding period ("every 6 months") needs to be considered as compounding twice a year (so n = 2). So just plug in all the numbers:

A = 1000(1 + 0.08/2)^(2•5)

A = 1000(1.04)¹⁰

Just plug it into your calculator to get the answer

Answer 2

P=1000, the original amount invested

r=.08, 8% interest rate

n= 2, 12 months divided by 6

t= 5, number of years

A= the amount of the principal plus the amount of interest gained. So, to get the amount of interest gained you would simply compute this formula then subtract the original principal.

A= 1000(1+.04)^(2*5)

A= 1000*(1.04)^(10)

A= 1000* (1.48024)

A= $1,480.24