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Compound Interest ((Plug in the giving information, P = 4000, r = 0.06, n…
Compound Interest
Plug in the giving information, P = 4000, r = 0.06, n = 4,
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problem has decimals, keep as many decimals as possible
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To solve compound interest problems, we need to take the given information at plug the information into the
compound interest formula and solve for the missing variable. The method used to solve the problem will
depend on what we are trying to find. If we are solving for the time, t, then we will need to use logarithms
because the compound interest formula is an exponential equation and solving exponential equations with
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The mathematical formula for calculating compound interest depends on several factors. These factors
include the amount of money deposited called the principal, the annual interest rate (in decimal form), the
number of times the money is compounded per year, and the number of years the money is left in the bank.
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If you walk into a bank and open up a savings account you will earn interest on the money you deposit in
the bank. If the interest is calculated once a year then the interest is called “simple interest”. If the interest is
calculated more than once per year, then it is called “compound interest”.
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If you deposit $4000 into an account paying 6% annual interest compounded quarterly, how
much money will be in the account after 5 years?
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