Question 1037142: Find the compound interest on $5000 at 6% pa compounded monthly for 2 years (2dp).
Help I keep getting different answers
Found 2 solutions by Theo, MathTherapy:
Answer by Theo(13342)   (Show Source):
You can put this solution on YOUR website! f = p * (1 + r)^n
f is the future value
p is the present value
r is the interest rate per time period.
n is the number of time periods.
time periods can be days, months, quarters, half years, years, etc.
if your interest rate is not in the time period specified, then you need to convert from whatever it is to whatever y0u require.
same goes with your number of time periods.
you are given:
p = 5000
r = 6% per year
n = 2 years
since you are compounding monthly, your time period needs to be months.
you also need to convert percent to rate.
6% / 100 = .06 / 12 = .005 interest rate per monmth.
n = 2 years * 12 = 24 months.
your new values are:
f = what you want to find.
p = 5000
r = .005 per month
n = 24 months
now you can use the formula correctly.
you get f = 5000 * (1.005)^24
solve for f to get f = 5635.798881.
round to 5635.80 if required.
a word of caution.
if you are using a calculator, they normally work on percent rather than rate.
otherwise you make the entries as required.
if you are suing a calculator that works on percent, you rentries would be:
pv = 5000
fv = 0
r = .5%
n = 24
pmt = 0
pmt at beginning or end of time period as required.
you would then tell the calculator to provide you with fv.
for doing future value or present value calculations only, pmt has to be equal to 0, otherwise the calculator will take recurring payments into consideration and give you an answer that you don't want.
here's an online calculator you can use.
http://arachnoid.com/finance/index.html
here's a picture of what i did for your problem using the calculator.
i did:
pv = 5000
fv = 0
np = 24
pmt = 0
ir = .5%
pmt at end or beginning didn't matter since pmt was 0.
i then clicked on fv and got the same answer i showed you above.
Answer by MathTherapy(10552)  (Show Source):
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