Question

Compound Interest When a bank account pays compound interest, it pays interest not only on the principal amount that was deposited into the account, but also on the interest that has accumulated over time. Suppose you want to deposit some money into a savings account, and let the account earn compound interest for a certain number of years. The formula for calculating the balance of the account after a specified number of years is: A

Answer 1

Answer: FVn = P( 1 + r )^n

Step-by-step explanation:

Compound interest means that the bank is providing you with a return based on the opening balance on your account each year. This opening balance will include the interest earned in the previous year therefore ensuring that the bank will keep paying you a higher interest each year.

The formula is;

FVn = P( 1 + r )^n

Where;

FVn is the future value of the amount after n number of years

P is the money that you deposited

r is the interest rate that the money is being compounded with

n is the number of years