How Do You Find Compound Interest And The Amount When Interest Is Compounded Annually?
To handle such problems, we need to use the formula : A = P(1+i)^n, where i is the rate per compounded period (like half yearly, quarterly, annually, daily, continuously) and n is the total number of periods in time t that is i=r/m and n=mt plug all the given values in the formula and calculate the amount after time t. lets consider one example if we want to calculate $16000 amounts to what sum if it is invested for 2 years at 10% per annum compound interest, interset being payable half yearly. For the given problem, we have p=$16000, r=10% =0.10 ( in decimals) Number of periods per year =2 ( as given rate is compounded half yearly) so i= r/m = 0.10/2=0.05, t= 2 years Thus, n=mt=2*2=4 The next step is to plug all the given values in the formula: A=16000(1+0.05)^4=16000*(1.05)^4=19448.10 Therefore, $16,000 amounts to $19448.10 in 2 years The last step is to calculate the interset earned = A-P =19448.10-16000=3448.10.
