Math Problem - Compound Interest

RM10,000 was invested into an account at an interest rate of 6% compounded every three months.

a) Find the amount at the end of 2 years.

b) After two years the bank increased its interest rate to 8% compounded every three months. Find the amount at the end of five years of investment.

Comments for Math Problem - Compound Interest

 Aug 05, 2011 Compound Interest by: Staff The question:RM10,000 was invested into an account at an interest rate of 6% compounded every three months.a) Find the amount at the end of 2 years.b) After two years the bank increased its interest rate to 8% compounded every three months. Find the amount at the end of five years of investment.The answer: a) Find the amount at the end of 2 years.6% compounded every three months (quarterly) for the first 2 yearsA = P*(1 + r)^tA = final balance of the investment at the end of 2 yearsP = principle (the initial investment)r = decimal form of quarterly interest ratet = time in quarters (number of 3 month periods)P = RM10,000r = 0.015 (.06 is the decimal form of 6%. It is = 6÷100. r = the quarterly interest rate: .06/4 = 0.015)t = 8 quarters (4 quarters per year x 2 years = 8 quarters)A = P*(1 + r)^tA (at 2 years) = 10,000*(1 + 0.015)^8A (at 2 years) = 10,000*(1.015)^8A (at 2 years) = 10,000*(1.12649)A (balance at 2 years) = RM 11264.9b) (the last 3 years) After two years the bank increased its interest rate to 8% compounded every three months. Find the amount at the end of five years of investment.8% compounded every three months (quarterly) for the last 3 yearsA = P*(1 + r)^tA = final balance of the ?initial? investment of RM10,000 at the end of 5 yearsP = principle (the value of the investment at the beginning of the last 3 year period)r = decimal form of quarterly interest ratet = time in quarters (number of 3 month periods)P = RM 11264.9r = 0.02 (.08 is the decimal form of 8%. It is = 8÷100. r = the quarterly interest rate: .08/4 = 0.02)t = 12 quarters (4 quarters per year x 3 years = 12 quarters)A = P*(1 + r)^tA (at 5 years) = 11264.9*(1 + 0.02)^12A (at 5 years) = 11264.9*(1.02)^12A (at 5 years) = 11264.9*( 1.26824)A (balance at 5 years) = RM 14286.6The final answer is: a) The amount at the end of 2 years = RM 11264.9b) The amount at the end of five years of investment = RM 14286.6Thanks for writing.Staff www.solving-math-problems.com