Regular Compound Interest Formula

Definition

where,

P = principal amount (initial investment)
r = annual interest rate (as a decimal)
n = number of times the interest is compounded per year
t = number of years
A = amount after time t

Example Problem

An amount of $1,500.00 is deposited in a bank paying an annual interest rate of 4.3%, compounded quarterly. Find the balance after 6 years.

Solution

Use the regular compound interest formula,
A = P ( 1 + r/n ) ^nt, with P = 1500, r = 4.3/100 = 0.043,
n = 4 ( not 1/4 ), t = 6. Therefore,

So, the balance after 6 years is approximately $1,938.84.

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