1) The account pays 2.5% annual interest compounded monthly.
2) The account pays 1.75% annual interest compounded quaterly.
3) The account pays 4% annual interest compounded yearly.
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You want to have a $2500 after 2 years. Find the amount you should deposit for each of the situations described below.
4) The account pays 2.25% annual interest compounded monthly.
5) The account pays 2% annual interest compounded quaterly.
6) The account pays 5% annual interest compounded yearly.
I just need help being taking throungh the problems and how to write them. I just don't understand it!!!The formula for compound interest is:
A = P * [1 + (r / n)]^(n * t)
Where:
A = Amount
P = Principal (amount deposited)
r = annual interest rate
n = number of times compounded in one year
t = number of years
#1)
A = P * [1 + (r / n)]^(n * t)
A = $1600 * [1 + (.0225 / 12)]^(12 * 3)
A = $1600 * [1 + (.00208333)]^(36)
A = $1600 * [1.00208333]^(36)
A = $1724.48
Do the same for #2 and #3. (Plug and chug).
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To answer questions 4, 5, & 6, use the same formula,
but we'll solve for Principal instead of Amount.
A = P * [1 + (r / n)]^(n * t)
P = A / [1 + (r / n)]^(n * t) <--- Solved for 'P'
#4)
P = A / [1 + (r / n)]^(n * t)
P = $2500 / [1 + (.0225 / 12)]^(12 * 2)
P = $2500 / [1 + (.001875]^(24)
P = $2500 / [1.04598]
P = $2390.09
Do the same for questions 5 & 6. (Again, plug and chug).
Good luck in your studies,
~ Mitch ~
P.S. - There's an online calculator for questions (1-3) at:
http://www.math.com/students/calculators...Use the compound interest formula, this website should help. http://math2.org/math/general/interest.h...