Question

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Compound Interest Formulas
The interest of a compound interest investment or loan can be computed with the formula
I= A - P(where A is given below).
The end amount of a compound interest investment or loan can be computed with the formula
A = P(1+1).
Use these formulas to evaluate the amounts indicated below.
Let P = $5, 100, r = 8.2%, n= 2, and t = 3 years. Determine the interest, I, at the end of 3
years.
Interest = $
dollars
Let P = $6, 800, r = 6.7%, n = 4, and t = 5 years. Determine the total end amount, A, at the
end of 5 years.
End Amount = $
dollars
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4

Answer 1

Explanation:

this simply means to put the given values into the given formula and calculate.

the only thing to really think about : when using the interest rates, r% is used as r/100 in the formula.

P = $5100

I = P(1 + r/n)^(nt) - P =

= 5100(1 + 0.082/2)^(2×3) - 5100 =

= 5100(1 + 0.041)⁶ - 5100 =

= 5100(1.041)⁶ - 5100 =

= 5100×1.272636506... - 5100 =

= 1,390.446182 ≈ $1,390.45

P = $6800

A = P(1 + r/n)^(nt) =

= 6800(1 + 0.067/4)^(4×5) =

= 6800(1 + 0.01675)²⁰ =

= 6800(1.01675)²⁰ =

= 6800×1.394066919... =

= $9,479.655048... ≈ $9,479.66