ss_4_6

ss_4_6 - Section 4.6. Compound Interest The compound...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Section 4.6. Compound Interest The compound interest formula is given by A n ( t )= P (1 + r n ) nt where P = Principal (Present Value) A n ( t ) = Amount (Future Value) r = annual rate of interest (in decimal form) n = number of compounds per year t = number of years Example. $1000 is invested at a 6% annual rate. Find the amount in 2 years if the interest is compounded (a) yearly, (b) quarterly, (c) monthly, (d) daily. Solution. LetA = A n ( t )= P (1 + r n ) nt = 1000(1 + . 06 n ) 2 n .Th en (a) A = 1000(1 + . 06 1 ) 2 =1 , 123 . 60 ( n =1) (b) A = 1000(1 + . 06 4 ) 8 =1 , 126 . 49 ( n =4) (c) A = 1000(1 + . 06 12 ) 24 =1 , 127 . 16 ( n = 12) (d) A = 1000(1 + . 06 365 ) 730 =1 , 127 . 49 ( n = 365) Note. In the above example, A increases as n increases. What happens to A as n →∞ ?Thean swe r to this question is given by the following. A n ( t )= P (1 + r n ) nt Pe rt as n →∞ When A is given by A = Pe
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 12/11/2011 for the course MAC 1140 taught by Professor Kutter during the Fall '11 term at FSU.

Page1 / 3

ss_4_6 - Section 4.6. Compound Interest The compound...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online