Interest Question..?

The question asks:

If 2000 dollars is invested in a bank account at an interest rate of 9 per cent per year, find the amount in the bank after 6 years if interest is compounded annually: ???

Find the amount in the bank after 6 years if interest is compounded quarterly: ???

Find the amount in the bank after 6 years if interest is compounded monthly: ???

Finally, find the amount in the bank after 6 years if interest is compounded continuously: ???

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For the first part this is what I did:

The Interest = Principal * rate * time

I(6 yr) = $2000 * .09 * 6 = $10.80

A = P + I = $2000 + $10.80 = $2010.80

Am I on the right track? Because the above answer is wrong for the first part... and I am unable to do the other parts because of it.

Thanks for any help/suggestions/hints.

I appreciate it.

Interest Question..?auto loan

yes, but there is a formula which makes it easier.

A = P*(1 + i)^n

where P is the principal, i is the interest rate and n is the number of periods

compounded anually: A = 2000*(1+ .09)^6

A = 3354.20

compounded quarterly: A = 2000*(1 + .09/4)^(4*6)

A = 2000*(1.0225)^24

A = 3411.53

compounded mothly: A = 2000(1.0075)^(12*6)

A = 3425.11

Interest Question..?

loan

I think your answer is wrong because, the amount changes each year as the interest is added each year. $10.80 would be the interest accrued after 1 year, so for year 2, you%26#039;d have to add 2010.80 * .09 etc etc... see if this helps put you on the right track if it makes sense..........|||This is the formula you should be using.

A = P(1 + (rate/# of times it%26#039;s compounded)^(# of times it%26#039;s compounded x time)

A = 2000(1 + (.09/1))^(1x6)

A = 2000(1.09)^6

A = 2000(1 + (.09/4))^(4x6)

A = 2000(1.0225)^24

Continuous interest

A = Pe^(rt)

A = 2000e^(.09x6)

A = 2000e^.54|||Not quite. You%26#039;re forgetting the compounding. The formula is

F = P (1+ i)^n

where F is the final value, P is the present value, i is the interest rate and n is the number of periods.

Your A = P + I is simple interest.

So in your first example, F = 2000 (1 + .09) ^6

Now the trick is, when you are talking different periods of time, your interest rate has to reflect that. So, for instance, 9 per cent annually is about .00024658 daily (in a 365 day year).

Continuous compounding involves the use of a limit to N - the value of N getting infinitely small as N approaches zero, known as Euler%26#039;s number, a constant designated by the letter e. e = 2.71828

The formula there is F = Pe^Yr where Y is the number of years, and r is the annual interest rate.

Good luck! Hope this helps!

“The most powerful force in the universe is compound interest” -- Albert Einstein