4_6 - Section 4.6 Compound Interest Instructor Ms Hoa...

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Section 4.6: Compound Interest Instructor: Ms. Hoa Nguyen ([email protected]) 1 The compound interest formula The compound interest formula computes the amount A after t years due to a principal P invested at an annual interest rate r compounded n times per year. The compound interest formula is given by A = P (1 + r n ) nt where A = Amount (Future Value) P = Principal (Present Value) r = annual rate of interest (in decimal form) n = number of compounds per year t = number of years Example 1 : Example 2 : 1
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Example 3 : Example 4 : 2 Continuous Compounding The continuous compounding formula computes the amount A after t years due to a principal P invested at an annual interest rate r compounded continuously. The continuous compounding formula is given by A = Pe rt where A = Amount (Future Value) P = Principal (Present Value) r = an interest rate compounded continuously (in decimal form) t = number of years e 2 . 718 ...
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