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Find the Compound Interest

by David
(Hartsville, SC, USA)











































principal $2,000 rate 16% compounded annually time 2 years

Comments for Find the Compound Interest

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Sep 11, 2011
Compound Interest Calculation
by: Staff


The question:

by David
(Hartsville, SC, USA)


principal $2,000 rate 16% compounded annually time 2 years

The answer:


principal $2,000 rate 16% compounded annually time 2 years


A = P*(1 + r)^t

A = final balance of the investment at the end of 2 years
P = principle (the initial investment)
r = decimal form of annual interest rate
t = time in years (number of 12 month periods)

P = $2,000

t = 2 years (note: if the time period were in quarters t = 4 quarters per year x 2 years = 8 quarters)

r = 0.16

(.16 is the decimal form of 16%. It is = 16÷100. r = the interest rate per time period (annually in this case): .16/1 = 0.16 [note: if the interest were compounded quarterly r = .16/4; if the interest were compounded monthly r = .16/12; etc. )


A = P*(1 + r)^t

A (at 2 years) = 2,000*(1 + 0.16)^2

A (at 2 years) = 2,000*(1.16)^2

A (at 2 years) = 2,000*(1.5609)

A (balance at 2 years) = 3,121.79



The final answer is: A (balance at the end of 2 years) = $3,121.79



Thanks for writing.

Staff
www.solving-math-problems.com


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