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How do I figure out compound interest in an equation? Do I still do I=PRT and multiply the numbers together like simple interest?

Guest May 10, 2017
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No the formula for compound interest is 

 

\(FV=PV(1+r)^n\)

 

where

FV=future value

PV = present value (at the start)

r is the rate per compouning period expressed as a decimal

n is the number of compouning perods.

 

so 

If you inbest $250 for 3 years at 6% per annum compounded monthly then

 

n = 3*12 = 36   (months)

r=  0.06/12 = 0.005   ( this is the rate per month)

so

 

FV(in three years) = \(250(1+0.005)^{36} = 250*1.005^{36} \)

 

250*1.005^36 = $299.1701

Melody  May 10, 2017

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