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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
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Example:
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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:
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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. |
