Compound Interest Formula

Compound Interest Formula

P= principal amount (the initial amount you borrow or deposit)

r= annual rate of interest (as a decimal)

n= number of years the amount is deposited or borrowed for

A= amount of money accumulated after n years, including interest

n= number of times the interest is compounded per year

Example: An amount of $1,500.00 is deposited in a bank paying an annual interest rate of 4.3%, compounded quarterly. What is the balance after 6 years?

Solution: Using the compound interest formula, we have that

P = 1500, r = 4.3/100 = 0.043, n = 4, t = 6.

So,the balance after 6 years is approximately $1,938.84.