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

#1**+1 **

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