The formula compound Interest as,
P => Principal Amount or Base
Amount
r => Annual Rate of Interest
t => Number of Years.
A=> Accumulated Money after (n)
years with including Interest.
n => Compound Interest Interval(Daily, Quarterly,
Half yearly, Yearly).
For example,
Q.)
An amount of $2,000 is deposited in a bank paying an annual interest rate of
14%, compounded yearly. What is the balance after 5 years?
Ans.)
a)
Principal amount: $2,000
b)
Interest Rate: 14%
c)
Effective Annual Rate: 14%
d)
Calculation Period: 5 years
P = 2000, r = 14/100 = 0.14, n = 1, t = 5. Accordingly,
The Balance after 5 years is approximately $3,850.83.
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