SOLUTION: Here is the formula used to find compound interest. In this situation, interest is compounded once a year: {{{ A = P(1 + r)^t }}} How would the formula change if the

Algebra ->  Equations -> SOLUTION: Here is the formula used to find compound interest. In this situation, interest is compounded once a year: {{{ A = P(1 + r)^t }}} How would the formula change if the       Log On


   

Question 1140237: Here is the formula used to find compound interest. In this situation, interest is compounded once a year: +A+=+P%281+%2B+r%29%5Et+ How would the formula change if the interest were compounded 4 times in a year? Explain your changes.

A = Final Amount
P = Principal Amount (money deposited)
r = Annual rate on interest
t = Time (number of years)
Found 2 solutions by Alan3354, Theo:
Answer by Alan3354(69443) About Me  (Show Source):
You can put this solution on YOUR website!
r --> r/4
t --> t*4

Answer by Theo(13342) About Me  (Show Source):
You can put this solution on YOUR website!
the formula as you show it is:

A = P * (1 + r) ^ t

if the interest were compounded 4 times a year, the formula would become:

A = P * (1 + r/4) ^ (t * 4)

the annual interest rate is divided by 4 to get the quarterly interest rate.

the number of years is multiplied by 4 to get the number of quarters.