Compound Interest

1
Compound Interest

• AP(1r/n)nt
• P - Initial principal
• r annual rate expressed as a decimal
• n compounded n times a year
• t number of years
• A amount in account after t years

2
Compound interest example

• You deposit 1000 in an account that pays 8
  annual interest.
• Find the balance after I year if the interest is
  compounded with the given frequency.
• a) annually b) quarterly c) daily

A1000(1.08/4)4x1 1000(1.02)4 1082.43
A1000(1 .08/1)1x1 1000(1.08)1 1080
A1000(1.08/365)365x1 1000(1.000219)365
1083.28