Suppose you invest $10,000 at 8.15% interest, compounded monthly. How much will you have after 5 years?

Answer 1

The compound interest formula is A = P (1 + ^r/_n)^nt

where A = final amount, P = initial principal balance r = interest rate

n = number of times interest applied per time period t = number of time periods elapsed

Substitute the given values into the equation with n=12 (monthly) and t = 5 (years) to get:

A = 10000 (1 + ^0.0815/₁₂)^12.5

=> A = 10000 (1 + ^0.0815/₁₂)⁶⁰

=> A = $15,010

To double-check your answer, there are many online compound interest calculators. Or, roughly, we know we have principal of 10,000 so our total must be more than this. 8.15% compounded monthly will be around 10% a year, or 1000. And 5 years of 1000 would be 5000. So I'm expecting my total to be around $15,000 (which it is).