10000 5 interest
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Are you saving for a future bill? Note that, for any given interest rate, the above formula simplifies to the simple exponential form that we're accustomed to. Then the compound-interest equation, for an investment period of t years, becomes: To do compound-interest word problems, generally the only hard part is figuring out which values go where in the compound-interest formula. Once you have all the values plugged in properly, you can solve for whichever variable is left.
You want to invest in an instrument yielding 3. How much should you invest? To solve this, I have to figure out which values go with which variables. The interest rate is 3. The only remaining variable is P , which stands for how much I started with. Since I am trying to figure out how much to invest in the first place, then solving for P makes sense. In fact we could go from the start straight to Year 5, if we multiply 5 times:. But it is easier to write down a series of multiplies using Exponents or Powers like this:.
We have been using a real example, but let's be more general by using letters instead of numbers , like this:. How about some examples Compound Interest is not always calculated per year, it could be per month, per day, etc. But if it is not per year it should say so!
And it is also possible to have yearly interest but with several compoundings within the year , which is called Periodic Compounding. This ad looks like 6.